Key points of investment
The company issued a performance announcement: 23 billion yuan in revenue of 1.55 billion yuan, an increase of 105% over the previous year; net profit due to mother turned a loss to a profit of 420 million yuan, falling in the lower range of the performance forecast; net profit not attributable to mother was 3.9 million yuan, and the impact of impairment preparations on profit was -115 million yuan. 24Q1 revenue increased 159% year over year to 1.07 billion yuan, net interest rate after deducting non-return to mother increased by 10pct to 39% year on year, and net profit after deducting non-return to mother reached 420 million yuan. In the profit distribution plan for fiscal year 23, the company distributed a cash dividend of 204 million yuan.
The film industry has been developing well over the past 24 years, and we look forward to resonating with the company's high-quality film reserves. According to data from the National Film Administration, the national movie box office in 2023 was 54.9 billion yuan, an increase of 83% year on year; the number of movie viewers increased 83% year over year to 1,299 billion. Entering 2024, the box office of New Year's Day movies set new box office records. Both the Spring Festival and Qingming movies set new records for the same period; more than 10 movies have already been screened on the May 1st series. The supply of films is sufficient and diverse, and the box office performance is worth looking forward to. The company's film business revenue and profit both increased significantly year-on-year in 2023 and 24Q1. The total box office of films invested, distributed, and included in the 2023 and 24Q1 box office was approximately RMB 8.46 billion and RMB 2.47 billion, respectively. Looking ahead to the full year of '24, “Grass and Trees” has been screened in the Qingming edition, with a box office grossing of about 110 million yuan as of 4/20; “Her Little Pear Vortex”, “Sweep the Black Man: Never Give Up”, “Invisible Man”, “The Mysterious Adventure of Mo Duo”, “Little People”, and “In Hand” are expected to be screened within the year. We are optimistic about the future performance of the company's film business.
In the new year of the company's animated film, pay attention to the schedule for “Nana”. The company ushered in a big year of animated films in 2024: the animated film “Heavy Rain”, which was released at the beginning of the year, had a box office of 17.29 million yuan as of 4/20; the first light-animated film “Xiao Qian” has already been scheduled for May 1st; “Nacha's Magic Boy Naohai” is in production and is expected to be screened within the year. We recommend paying attention to the upcoming schedule. AI multi-modal technology will also accelerate development in 2024. It is expected to reduce costs and increase production capacity for animation film production. As a leading animation film company, the company is expected to benefit. We are optimistic about the company's medium- to long-term animated film development space.
Businesses such as TV dramas are expected to contribute incremental results in '24. 1) 24Q1 The company achieved significant growth in both revenue and profit from the TV drama/online drama business. The company's online drama “Dali Temple Shaoqing Tour” went live on iQiyi in February; the costume romance comedy “The Saddle” is expected to be broadcast within the year; series such as “Mountain and River Pillow,” “Spring Dinner,” and “My Date List” continue to advance. The TV drama business has gradually resumed in 24, and revenue is expected to increase dramatically. 2) The 24Q1 artist brokerage business has grown dramatically. Among the PPP projects the company is participating in, the first phase of the Yangzhou Film and Television Base is expected to be put into production and operation in 24. Some key platforms, high-quality film and television companies and crews have already visited, inspected and announced their intention to cooperate. It is expected that multiple crews will enter the venue for filming after the park opens.
Profit forecast and investment rating: We are optimistic about the company's release performance of high-quality animated films in 24, and the further recovery of TV series and other businesses. Considering the good box office of movies released in Q1 and the sharp increase in TV drama business revenue, we raised the company's 24-25 net profit forecast of 98/1.11 billion yuan to 1,02/1.18 billion yuan, and added the 2026 forecast of 1.31 billion yuan to maintain the “buy” rating.
Risk warning: movie box office falls short of expectations, policy risks, project progress falls short of expectations