Event: In 2023, Reading Wen Group achieved revenue of 7.012 billion yuan, YoY -8.0%, adjusted net profit to mother of 1,130 billion yuan, YoY -16.2%.
The impact of channel adjustments continues, and the core platform ecosystem has achieved healthy growth. The company's online business revenue in 2023 was 3,948 billion yuan, down 9.5% year on year, mainly due to the company's continued optimization of distribution channels with low ROI. In terms of content ecology, the number of writers and works on the company's online reading platform grew steadily in 2023. Furthermore, the company continued to implement anti-piracy measures, and the paid revenue of the core platform increased significantly. In 2023, the number of monthly paying users of the company's online business increased 10.1% year over year to 8.7 million. Among them, monthly paying users for its own platform products increased 20% year over year, and revenue from starting reading increased by about 40% year on year.
Revenue from copyright operations is under phased pressure, focusing on the broadcast performance of key works in 24 years. In 2023, the company's copyright operation and other business revenue fell 6.1% year on year to 3,064 billion yuan, mainly because the number of works screened by the subsidiary Shinih Media was lower than in the same period last year; the company's copyright operations and other business revenue other than Shinih Media (mainly copyright licensing, animation, and proprietary games) increased 10.1% year on year. In 2024, the company's key IP adaptations are expected to be launched intensively, including the TV series “With the Phoenix”, the second season of “Celebrating the Years”, and “Dafeng Dafeng Goes More People”.
AI will reshape the company's IP incubation and operation ecosystem. At present, the AI big model has been fully integrated with the company's online reading business. The writer assistant launched by the company for writers has been connected to the big pen reading model, and the weekly usage rate of the AI function in writer's assistant has reached 30%; at the same time, AI translation is used to enable large-scale online literature. As of December 23, 21 of the top 100 best-selling works on the company's overseas reading platform WebNovel have been translated by AI. In the long run, the company will explore the application of AI in animated adaptations of novels, which is expected to improve the commercialization efficiency of high-quality IP content.
Profit forecast and investment advice: We are optimistic about the further improvement of the company's monetization capacity with AI technology. We expect the company's revenue to be 75/79/8.2 billion yuan in 2024/2025/2026, +7%/+5%/+4% year over year; adjusted net profit of 14/16/1.7 billion yuan, +25%/+11%/+9% year-on-year, maintaining the “buy” rating.
Risk warning: The production progress of movies and TV series falls short of expectations, and the development of the content ecosystem falls short of expectations.