Self-developed AIGC vertical model for film and television. At present, AIGC has evolved from basic general models to vertical application stages, and AIGC is deeply involved in all aspects of content production. Sora's technical report shows that massive amounts of high-quality video data are the training basis for its video generation model, and AI applications with scenes and space can only be developed based on high-quality corpus. Huace Film and Television has China's largest original film and television copyright library and video material library of over 50,000 hours. Based on its own sufficient multi-modal vertical corpus and technical reserves, it has developed a large multi-modal analysis vertical model and launched it internally. It has been used in depth in content creation and planning, post-production and review processes.

The effects of China's outflow to the sea are remarkable, helping to export culture. Huace has established C-DramaRights, a one-stop cloud platform for global film and television copyright trading. The platform has already entered 6,000 global users, including the BBC, Warner of the United States, and TV Tokyo in Japan. The company cooperated deeply with nearly 20 international platforms such as YouTube and Facebook to create more than 60 “Chinese Theatre” channels, with a total number of over 20 million YouTube fans.

In 2023, 30 new dramas were distributed overseas. Among them, dramas such as “To the Windy Place” and “Walk to the Wind” appeared on Netflix and were hit in more than 100 countries around the world. Since developing overseas business, Huace Group has distributed 150,000 hours of film and television content to more than 200 countries and regions around the world. Based on the accumulation of outstanding traditional Chinese culture and the production capacity of Huace and China's high-quality domestic film and television content production capacity, China's outflow overseas has both social and economic benefits, and the development prospects are great. In the future, with the development and application of vertical models for the company's micro-skits, AI+ skits are worth looking forward to.

Authorize live-action interactive skits to take advantage of technological development. Hualiu Film and Television, a subsidiary of Huace Film and Television's parent company, collaborated with Hippo Games. Huace Film and Television authorized and distributed the IP accounts. The first cooperation project will be IP-linked with the company's hit TV series “To a Windy Place”. With AIGC technology improving the quality and efficiency of content creation, the penetration of VisionPro virtual devices, and the expansion of C-side payments for live interactive video content, Huace will benefit from its rich reserves of IP content and AI technology, and enjoy the development dividends brought by technological changes.

Investment advice: We expect the company's net profit to be 4.63/6.06/713 million yuan respectively in 23-25. Content production strengthens the chassis, and AIGC is expected to increase the company's copyright value and maintain a “buy” rating.

Risk warning: content production progress and sales fall short of expectations, regulatory risks, technical progress falls short of expectations