Event: The company released its 2023 performance report, achieving operating income of 4.757 billion yuan, YoY +105.1%, adjusted net profit of 1,029 billion yuan, YoY +342.2%.
The offline entertainment industry is picking up, and gross margins are rising. Benefiting from the rapid recovery of the film and performance market, the company's online entertainment ticketing service revenue in 2023 was 2,259 billion yuan, up 111.5% year on year; entertainment content service revenue of 2,300 billion yuan (accounting for 48.4% of revenue), up 106.6% year on year. In 2023, the company participated in the screening of 52 domestic films, of which 30 were mainly distributed. The number of films and cumulative box office reached record high for the same period; advertising services and other revenue reached 198 million yuan, an increase of 43.5% year on year. In 2023, the company's overall gross margin was 50.13%, up 6.16 pcts year on year; in 2023, the sales expense ratio was 17.71%, down 2.99 pct year on year, and the management expense ratio was 7.81%, down 5.12 pct year on year.
Participation in leading films continues to increase, and their publicity capabilities are remarkable. The company has stepped up the layout of the entire film industry chain, and its ability to select films is outstanding. Judging from the coverage of leading films, according to Maogan Pro Edition, companies participated in 8 of the top 10 domestic films in '23, and the depth of participation (main production/main distribution) and breadth (quantity) of participation are increasing year by year. Over the past 24 years, it has continued to show strong content promotion and production capabilities. Cat's Eye participated in the top 3 New Year's Day box-office movies; “Flying Life 2”, produced and hosted by the Spring Festival company, ranked runner-up in the schedule, and also participated in “Hot and Hot Hot” and “Bears Are Incurring” and “Reversing Time and Space”.
The film market continues to improve, and the company has rich content reserves. According to Cat's Eye Movie Pro, as of March 24, the country's cumulative box office reached 15.934 billion yuan in 2024, an increase of 4.5% over the previous year. Looking ahead to 2024, “The Demon Boy in the Sea”, “Chaoyuan Alley”, and “Fengshen 2” are all expected to be launched within the year, helping the company continue to repair its ticketing business. Cat's Eye is rich in content, “Yellow Finch is behind!” “The Big “Anti-Party” and “The Last Way to Spend Money” have already been scheduled. In addition, content such as “Sauce Garden Alone”, and “Go Alone” are also scheduled to be launched within the year. The performance of the entertainment content business is worth looking forward to, and is expected to unleash performance elasticity.
Profit forecast: We expect the company's adjusted net profit for 24-26 to be 951/10.24/1,112 million, YoY -8%/+8%/+9%, maintaining a “buy” rating.
Risk warning: policy regulation risk; celebrity misconduct risk; box office falls short of expectations