Hengdian Film and Television issued an announcement: The company's revenue in 2023 was 2.35 billion yuan (up 64.6% year on year, driven by national box office growth), operating costs were 2.02 billion yuan (up 28.76% year on year); the company returned to mother and deducted non-profit of 166 million yuan and 74 million yuan (all turned into a profit); the company's net cash flow from operating activities in 2023 (up 138.73% year on year, net operating cash flow improved in a single quarter); sales gross margin and net margin were 14% and 7% respectively (gross margin and net margin data for both gross margin and net margin) (Better than the same period in 2021 and 2022). The company's annual revenue growth and return to mother and non-profit deductions converge with the recovery trend of the national film industry.
Key points of investment
Repairs continued in the first three quarters of 2023, and IMAX joined hands in the fourth quarter to highlight confidence in the positive development of the film market
In 2023, Q1-Q4 revenue was 7.4\ 4.3\ 7.8\ 40 billion yuan respectively, with operating costs of 5.1\ 4.4\ 6.4\ 4.2 billion yuan respectively; the company's profit for the first three quarters of 2023 turned into a profit. The first quarter results were driven by the Spring Festival program, imports in the second quarter were unsatisfactory, and the summer vacation program in the third quarter helped the company continue to recover. The performance of the National Day program in the fourth quarter was unsatisfactory, and the box office was under pressure in November. Furthermore, in 2023Q4, the company lost profits in a single quarter, but losses have narrowed year over year, and came under pressure.
In October 2023, the company signed a cinema agreement with IMAX, highlighting the company's attitude towards the positive development of the subsequent film market and increasing IMAX cinemas from the perspective of user experience.
The film market picked up in 2023, and the company's film investment market share reached 3.62%. In 2024, the cinema line market is expected to add revenue of 2,199 billion yuan (up 73.70% year on year) from beta to α, and the company's box office revenue of 2,085 billion yuan (up 81% year on year), of which asset-linked cinema box office revenue was 1.8 billion yuan (up 81.96% year on year), with a market share of 3.62%, and the film investment industry ranked second. The theatrical box office recovered relatively well in 2023 but did not exceed the peak in 2019 before the pandemic. Due to the low base in 2022 combined with the normalization of content scheduling in 2023, the national box office achieved a high increase in 2023, which achieved a better recovery compared to before the pandemic, and the recovery trend is prominent. Based on the recovery in the box office in 2023, animated films and domestic films will continue to support, and the box office market is expected to increase in 2024; there was a new increase in both box office and moviegoers on 2024 on New Year's Day, and movie viewing demand is more resilient; the performance of the Spring Festival program in February 2024 is expected to increase corporate performance in the first quarter of 2024; in terms of beta, the recovery in demand for offline movies is expected to drive a new increase in the national movie box office in 2024; from α, Hengdian Film and Television Abundant submission list (2023 company film and television investment, (Production and distribution business revenue of 150 million yuan). Self-owned content production continues. In addition to the main box office share, self-owned film and television productions are expected to enjoy alpha flexibility.
Demand for movie viewing is sinking while also balancing the national cinema layout and cultural tourism integration. In recent years, along with the economic development of third- and fourth-tier cities, the number of movie viewers has continued to expand. The sinking market has more room for development in terms of group size, frequency and average price; Hengdian Film and Television relies on chain management brand advantages and high-quality services to be competitive in the sinking market; at the same time, the company will also balance the layout of cinemas across the country. Project construction sites cover first-line, new first-tier, second-tier cinemas, etc. Increase market share, and pass is not ruled out Expansion of the scale of high-quality mergers and acquisitions. The company is also continuously exploring cultural tourism integration and carrying out marketing activities unique to Hengdian film and television culture, organically combining movie viewing rights with Hengdian tourism resources, marathons, Hengdian music festivals, etc., to transform the consumption of movie viewers and tourist groups.
Profit forecasting
Maintaining the “buy” investment rating, predicts that the company's revenue for 2024-2026 will be 2.74\ 31.34 billion yuan, with a profit of 3.1\ 4.0\ 48 billion yuan respectively. The current stock price corresponds to 2024 to 2026 PE of 30.9, 24, and 20 times, respectively. In terms of investment, watching high-quality films in the short term, the inflection point of mid-term single-screen production. In the long run, both supply and demand are expected to double up to help the main business recover. The company is also actively exploring the “cinema+” model. Businesses such as dramas, digging deeper into the copyrighted film market, and increasing the revenue potential of idle advertising resources are expected to boost the content business in 2024, thereby maintaining a “buy” investment rating.
Risk warning
The risk that the growth rate of the film industry will slow down; the recovery is less than expected; the risk of the supply of high-quality films; the risk of performance fluctuations due to delays in the release of movies and other projects; the risk that cinema operations fall short of expectations; the risk that IMAX cinemas will not perform as expected; the risk of housing leases expiring; the risk of public health emergencies; the risk of macroeconomic fluctuations, etc.