Hengdian Film and Television disclosed its 2023 annual report and 2024 quarterly report: (1) In 2023, the company achieved revenue of 2,349 billion yuan, an increase of 64.62% over the previous year; net profit to mother was 166 million yuan, and non-net profit was deducted from mother 74 million yuan. With the recovery of the domestic film market, the company's performance turned a loss into a profit. (2) In 24Q1, the company achieved revenue of 842 million yuan, an increase of 13.50% year on year; net profit of 219 million yuan, up 46.43% year on year. During the reporting period, the company sold 39% of the shares in the participating company Hangzhou Film to Hangzhou Wenguang Group and obtained 42.59 million yuan in illiquid asset disposal profits; 155 million yuan of non-net profit was deducted from the mother, an increase of 13.57% year on year.
The market share of cinemas has further increased, and survival of the fittest has improved efficiency. In 24Q1, the country recorded a box office of 16.356 billion yuan, an increase of 3.14% over the previous year; cinemas directly managed by the company recorded box office revenue of 571 million yuan, with a market share of 3.85%, an increase of 0.10pp compared to 23Q1. By the end of the 24Q1 period, the company had 442 direct-run cinemas with 2,822 screens and 84 participating cinemas and 476 screens. During the reporting period, the company opened 11 new direct-run cinemas and shut down 1 cinema.
Participated in the production of 3 Spring Festival headline videos. The 24Q1 company participated in the production of the Spring Festival's flagship film “Flying Fast, Life 2,” “When Bears Go: Reversing Time and Space,” “Article 20,” and “Let's Shake the Sun Together”, which was officially screened on March 30. According to the Cat's Eye Pro Edition, the total box office reached 8.076 billion yuan. The company has prepared film and TV series projects such as the movie “The Siege of the Walled City of Kowloon” (scheduled to be screened on May 1, 24), “The Legend of Condor Heroes: The Master of Heroes”, “The Real and False Master”, and the web drama “Knights Don't Work”.
Profit forecasting and investment advice. We estimate that in 2024-2026, the company's revenue will be 26.89/29.39/3.150 billion yuan, and net profit to mother will be 325/4.01/455 million yuan. The box office share and operating efficiency of the company's directly-managed cinemas have steadily increased, and the Hengdian Group is rich in resources. Referring to comparable companies, we gave the company a PE valuation of 40 times in 2024, corresponding to a reasonable value of 20.50 yuan/share per share, maintaining a “buy” rating.
Risk warning. Box office growth fell short of expectations; competition in the cinema market intensified; uncertainty about the earnings of film and TV series projects; changes in industry regulatory policies.