The 2023 results are largely in line with our expectations
The company announced its 2023 results: operating income of 4.757 billion yuan, up 105% year on year, falling into the range of 4.7 billion yuan to 4.8 billion yuan in the previous performance forecast; net profit to mother of 910 million yuan, a significant increase over the previous year, falling into the expected range of 8.8 to 930 million yuan; non-IFRS net profit of 1,032 million yuan, a significant increase over the previous year.
The company's performance generally met our expectations.
Development trends
The coverage of top films in 2023 is high, or the breadth and depth of investment in high-quality films will continue to increase. Overall sector: The company's entertainment content business revenue in 2023 was 2.3 billion yuan, an increase of 107% over the previous year, accounting for 48.4% of the revenue. Of these, 4 of the top ten domestic movie box office films in 2023 were promoted by Maze Eye, and 5 were mainly produced by Maogan. Films: In 2023, the company participated in 54 domestic films, including 52 domestic films that participated in the promotion and controlled the distribution of 30 domestic films. The number of films and cumulative box office sales reached record highs. Many of these films had leading box office results, such as “Man Jianghong” and “Fengshen Part 1:
“Song of the Morning Song”, “In the Octagonal Cage”, etc. We believe that the company has strong film selection and data capabilities, and is expected to continue to increase the breadth and depth of investment in high-quality films in the future.
The online ticketing business recovered along with the market, and the performance business provided new highlights. Movie: In 2023, the company's online ticketing business revenue was 2,259 billion yuan, up 112% year on year, accounting for 47.5% of revenue. Furthermore, the company's sales expenses rate in 2023 decreased by 17.7% year-on-year. We believe that the competitive pattern in the movie ticketing market is basically stable, and the company is expected to maintain its market share advantage. Performances: According to the China Performance Industry Association, the national performance box office revenue in 2023 was 33.596 billion yuan, up 482.8% year on year, and 165.3% year on year compared to 2019 (excluding rural performances, entertainment venue performances, and travel performances). The company's offline performance revenue and GMV both reached record highs in 2023, and continued to explore overseas markets. It also launched the ticketing platform UUTIX in the second half of 2023 to officially launch its own performance ticketing business in Hong Kong, China.
The 2024 film list is well-stocked, so keep an eye on subsequent box office performance. Ticketing: We maintain the annual box office forecast of 60 billion yuan, including service fees. The company's movie ticketing business is expected to grow simultaneously with the market; in addition, the performance market is expected to maintain strong supply and demand, or contribute to revenue elasticity. Content: “Flying Spike 2,” which the company participated in and controlled the distribution of the 2024 Spring Festival program, won the runner-up in the schedule; in the follow-up film list, “Yellow Finch Is Behind!” “The Big “Anti-Fighter” and “Daredevil's Money” have already been scheduled. Reserve contents include “Sauce Garden Lane” and “Crisis Line”, which participated in production/distribution, etc., as well as the self-developed “Fire on the Plains”, “Rebirth”, “Genius Game”, “Umbrella Girl”, and “Child of Time.” We judge the continuous development of the company's “product+system+organization” core competencies, and focus on the subsequent movie box office performance in 2024.
Profit forecasting and valuation
Keep the net profit forecast unchanged. The current price corresponds to 2024/2025 11.2/9.4x P/E. Maintaining an outperforming industry rating and target price of HK$12.0, corresponding to 2024/2025 12.5/10.5x P/E, with 12.4% upside compared to the current price.
risks
The box office in the general market fell short of expectations, the performance of key content fell short of expectations, competition intensified, and there was a risk of asset impairment.