Core views:
The company disclosed 23 years of results, and revenue and profit were in line with expectations. The company achieved revenue of 7.012 billion yuan in '23, YoY -8%, in line with the agreed forecast of 7.014 billion yuan. GAAP net profit for '23 was $800 million, YoY +32%, vs. consistent forecast of $779 million. NongAAP's net profit to mother was $1,130 million (net profit margin was 16%, down 2pct year on year), YoY -16%, vs. consistent forecast of $1,114 million. The gross margin in '23 was 48%, down 5 pct from the previous year. It was mainly due to the fact that Shinih Media's gross margin declined a lot, due to the lack of high-margin film projects contributing to performance in '23.
Online business revenue reached 3,948 billion yuan, YoY -10%, self-operated channels were stable, and ROI was continuously optimized. The proprietary channel was 3.414 billion yuan, YoY -2%; Tencent channel was 342 million yuan, YoY -42%. Third-party channels were 193 million yuan, down 34% year over year. The core product's starting point reading revenue also increased by 40%, and its own channels were steady. Tencent and third-party channels are still declining due to optimization due to ROI considerations. 8.7 million monthly paying users, YoY +10%, driven by positive factors such as anti-piracy measures. The average monthly ARPU is 32.5 yuan, YoY -14%.
Excluding Xinli, the IP business revenue increased 11% year-on-year. Shinih Media's profit was steady. In 24 years, it ushered in a major product cycle, and its performance was quite elastic. Shini's revenue for the year 23 was 1.26 billion yuan, down 22% year on year, and profit was 487 million yuan (down 9% year on year). Other IP business revenue was $1,714 million, YoY +11%, mainly driven by increased revenue from copyright licensing, proprietary games, and animation.
Profit forecasting and investment advice. After 24 years, we have ushered in a major product cycle. The TV series “Celebrating the Years 2”, “Dabong Gaijin”, “With Feng Xing”, and the movie “Hot and Hot”, IP business revenue is expected to accelerate. We expect revenue of $7.3 billion and $7.9 billion for 24-25, up 4% and 9%, and adjusted net profit to mother of $1.39 billion and $1.56 billion, up 23% and 13%; based on SOTP estimates, the company's reasonable value is HK$39.77 per share, maintaining a “buy” rating.
Risk warning. Risks such as stricter content regulation, the impact of new forms of entertainment, and artist reputation.