Introduction to this report:

In 2023, the company plans a large amount of depreciation to affect performance. It is expected that many movies will hit theaters in 2024 and later, and the participating film “Life at Speed 2” will be screened during the 2024 Spring Festival.

Key points of investment:

It will be reinstalled and launched in 2024 to maintain the “gain” rating. The company's film projects released in 2023 fell short of expectations, and at the same time, significant depreciation was applied. Most reserve projects were launched in 2023-2024, and the screening period is 2024 or later. Currently, the main reserve investment projects include “Operation Red Sea 2: Operation Killer Whale” and “Legend”. In addition, the participating project “Speeding Life 2” will be screened during the 2024 Spring Festival. Considering the 2023Q4 deduction, we lowered the 2023 EPS forecast to -0.34 yuan (previous value was -0.15 yuan), maintain the 2024/2025 EPS forecast of 0.27/0.38 yuan, maintain the target price of 10.66 yuan, and maintain the “gain” rating.

Incident: The company announced its 2023 performance forecast. It is estimated that net profit loss due to mother will be 36-550 million yuan, and net profit loss after deducting non-return to mother will be 55-750 million yuan.

Performance fell short of expectations, and the main slideshow's failure to meet box office targets affected profits. The company's main slideshows in 2023 include “No Name” (box office: 931 million yuan), “Don't Call Me a “Gambler” (box office: 41 million yuan), “Tip of the Sword” (box office: 52 million yuan), “Burst Point” (box office 100 million yuan), and “The Volunteer Army: Attack of the Soldiers” (box office: 867 million yuan). A total of 10 films were invested and distributed, with box office grossing of 6.822 billion yuan, an increase of 52.04% over the previous year. However, as the main feature film did not meet expectations, and high-grossing films such as “Changjin Lake's Watergate Bridge” (box office 4,067 billion yuan) were screened in 2022, the film business revenue declined year on year.

The cinema business resumed normal operations. The company's cinemas mainly cover major cities such as Beijing, Shanghai, Hangzhou, and Ningbo. In 2023, its cinemas had box office revenue of 1,047 billion yuan without service fees, ranking 7th among domestic film investment companies, a significant increase over 2022.

Risk warning: The movie's box office fell short of expectations, and the release date of the film is uncertain.