Incident: The company released its 2023 financial report. It achieved annual revenue of 1,222 billion yuan, a year-on-year increase of 28.4%, and achieved adjusted net profit of 227 million yuan, an increase of 60.4% over the previous year. The adjusted net profit margin reached 18.6%, an increase of 3.7 pcts year-on-year. The company plans to pay a dividend of 0.218 yuan per share, with a total dividend of 78.58 million yuan, accounting for 36.8% of the annual net profit.
Comment: Premium copyright dramas are of the highest quality, and production capacity upgrade reserves are rich in content. The company's core business contributed 1,174 billion yuan in revenue in 2023, an increase of 24.3% over the previous year. A total of 116 episodes of the 3 dramas “Just Love”, “Inquire About Guanshan” were broadcast, an increase of 11 episodes over 22, and all three series received good reputation and platform popularity. The average revenue also led the industry, continuing to reflect the company's leading production capacity in copyrighted dramas. The company is also rich in follow-up reserves. “You Also Have Today” was broadcast in January. “Handicapped Men and Women”, “Midnight Return” and “Crime Hunting Guide 2” are expected to be launched within the year. At the same time, the company previously released 16 films, covering various categories such as suspense, urban romance, costume, etc., and production capacity upgrades continue to advance, showing good growth in the context of slowing industry growth.
Actively seize short drama opportunities and explore overseas markets at the same time. The company's revenue from the skit related business in 2023 was 32.23 million yuan, an increase of more than 12 times over the previous year, and the gross margin of the skit business also increased from -21% to 25%.
In the mainland market, the company launched 8 skits and 16 unit stories on Douyin, with a total of over 2.4 billion plays and over 140 million likes. Many series such as “29,” “Behind the Traffic,” “292,” and “Save My Family” occupy the top 1 of the Douyin skit drama list. Currently, the reserve content exceeds 100. Overseas, the company has also begun to simultaneously explore production and distribution to create its own overseas skit platform. Currently, 2 overseas skits have been launched.
Breakthroughs have been made in overseas business, and localized production has been pioneered. The company's overseas revenue in 2023 was 38.81 million yuan, an increase of 89% over the previous year. The company established the overseas business entity platform Ling Meng International, which focuses on overseas distribution of series, overseas localized content production and distribution, and commercial operation of overseas IPs. Many series such as “Just Love”, “Ask Heart” and “One Mind Guanshan” were broadcast on overseas first-tier platforms, and the distribution price reached the leading level of the industry. Currently, the company has distributed Chinese-language content to over 190 countries and regions.
On the other hand, the company is speeding up overseas reproductions of its own IP. The Thai version of “Just Thirty” is already out, and the Thai edition of “Illustrated Guide to Crime Hunting” is also being produced. At the same time, it is also co-developing and producing localized content with companies such as Thailand's GDH, Thailand's KANTANA, and Indonesia's MNC.
Investment advice: We continue to be optimistic about the long-term development of the company. We expect the company to achieve revenue of 1,580/21.10/2.03 billion yuan in 2024-2026, an increase of 29%/34%/19% over the previous year, and realized net profit of 2.45/315/356 million yuan, an increase of 15%/28%/13% over the previous year. The corresponding PE is 10x/8x/7x, which is covered for the first time, giving a “buy” rating.
Risk warning: Series launch progress falls short of expectations, policy regulation risks, and increased industry competition