Core views
Judging from history, the number of company members experienced a rapid rise in 18-20 years, from around 10 million to 36 million (2 years CAGR 83%), mainly due to innovation in variety content such as “Sister” and “The Big Detective,” as well as the platform's own breaking circle. The company's membership growth slowed in 21-23, and the 3-year CAGR was 23%.
We are optimistic that starting in '24, the number of company members will rise to the next level, mainly by improving the quantity/quality of episode content and channel building.
1) Series layout: Increased production capacity, perfect heading/boutique/short drama layout to review overseas Netflix and domestic iQiyi. Series are the most effective content category to motivate members. In '21, the company used the “Monsoon Theater” as an opening point to gradually coordinate and independently decide on series with small investments+quality dramas, and its ability to make own dramas improved markedly. After 3 years of layout and cooperation, we are optimistic that the company's 24-year series will reach an inflection point, with a marked increase in production/quantity. In terms of quality/structure, it includes three levels: top series (collaboration with mature companies such as Huace) +small to medium quality dramas (mainly monsoon homemade) +short dramas (Douyin collaboration).
Among them, “With Phoenix” starring Zhao Liying and Lin Gengxin will be broadcast on platforms such as Tencent Video and Mango TV starting March 18, and is receiving a lot of attention.
At the same time, Douyin co-creation and AI technology are expected to drive the long-term development of skits. The company recently released AI director Aimang, which can provide creative design, data support, video editing, etc. for the program.
2) Channel construction: Carrier/Internet/bank membership binding, seeking growth, companies actively bind to other membership systems, complement each other, jointly drive an increase in the number of members, and actively reach membership promotion cooperation with Internet platforms such as Ali, as well as central state-owned enterprises such as CMB and China Mobile.
Investment advice: Member revenue is more resilient in the long term, and I am optimistic that the company's membership revenue will rise to the next level in 24 years. In the past, the company focused on variety shows, and there was plenty of room for series improvement. Long dramas and short dramas were two-wheel drive: 1) Long dramas: More than 80 series appeared at China Merchants Conference in 24, with the “Super Partner” cooperation model tied to the head director and screenwriter; 2) Short dramas: It has been laid out for 4 years through the “Big Man Project” and cooperated with Douyin for a skit co-creation plan, and state-owned enterprise qualifications, performing arts resources, and production capabilities to build a competitive advantage. We expect the company's revenue for 2024-2025 to be 16.40 billion yuan and 18.04 billion yuan, up 12.1% and 10.0% year on year, net profit to mother of 2.07 billion yuan and 2.46 billion yuan, up -41.7% and 18.4% year on year. The PE corresponding to the latest market value is 22.6x and 19.1x.