Core view: The strategic layout of Shanghai Film covers the in-depth development of the IP business, the innovation and upgrading of the theater business, and close collaboration with Shanghai Film Group. Together, these factors form a solid foundation for the company's future growth.
The main business of IP and cinema went hand in hand, and listed companies and Shanghai Film Group developed collaboratively. The company's IP business is not only the second growth curve, but it can also drive cinema traffic and sales of sales products. Shanghai Film Group is not only a major shareholder of Shanghai Film Co., Ltd., but also provides a lot of support for the IP development of the Shanghai Film Group. The IP business of listed companies also drives the economic benefits of the Group's cultural tourism real estate.
Cinema business: The construction of a basic market resonates with the renewal and upgrading of cinemas and the recovery of the movie market. Alpha:
The Shanghai Cinema has been renovated and upgraded, and diversified marketing strategies have been adopted to effectively increase the box office and the number of movie viewers, reduce operating costs, and increase profit margins. Furthermore, the company's IP business helps promote the development of its existing cinema and sales business, and the cinema business has in turn amplified the influence of IP. beta:
The 2024 New Year's Day and Spring Festival box office performance slightly exceeded expectations. Looking ahead to the summer and National Day, the release of blockbuster movies is expected to drive continued market growth; the share of movies in Shanghai is also expected to increase as the share of imported films in the box office increases.
IP business: It is expected to become a gripper for the integration of the Group's resources, and the potential is worth looking forward to. The market's main concerns about the company's IP development are that IP monetization space is difficult to calculate, IP was born early, and the effects of IP renewal are uncertain. However, we believe that an accurate error is not as vaguely correct. Compared to calculating the valuation of each IP, we should pay more attention to the company's IP strategy and the importance of this business to the main cinema business and the overall strategy of the group. We believe that compared to short-term challenges, we should focus more on long-term development space. The process of renewing old IPs and cultivating new IPs certainly faces many challenges, but through matrix development, online and offline linkage, and multi-channel penetration, IP is expected to gradually penetrate people's daily lives; AI is also expected to reduce the cost of IP development and IP monetization and increase production capacity. Classic animation IP not only has a deep cultural heritage, but also contains huge commercial value. It can be innovated and extended through various methods such as sequels, derivatives, and cross-border cooperation, bringing new growth points to the company.
Profit forecast and investment rating: We believe that Shanghai Film, as the leading cinema in the Shanghai region, is expected to benefit from a recovery in the movie market. Based on the positive beta of the industry, the company is expected to obtain a positive α that exceeds the average growth rate of the industry based on the “cinema +”, “IP+”, and “AI+” strategic layout. We expect the company's net profit to be 1.2/26/420 million yuan in 2023-2025, respectively, and the current stock price corresponding to PE is 124/59/37 times, respectively. We believe that the reasonable market value of the company in 2025 should be 20.49 billion yuan, corresponding to PE 49 times, covered for the first time, and given a “buy” rating.
Risk warning: Film box office performance falls short of expectations, AI technology development falls short of expectations, and IP renewal and development fall short of expectations.