Incident: According to the official WeChat account of Sina TV, the spin-off short drama “Celebrating the Years of Youth” of Qingyunian IP will be launched on May 1, '24. It will be produced by Reading Group and Xiong & Rabbit Pictures. The content is a prequel to Celebrate Years.
Previously, the TV drama “Celebrating the Year 2” went viral in October '23. As of April 21, '24, the number of subscribers for Tencent Video was 13.39 million, and it is expected to be broadcast within 24 years. Reading Wen is developing a series around the core IP, and subsequent broadcasts of TV dramas, skits, etc. to celebrate the rest of the year may increase the company's attention.
2024 is the company's IP year, and various projects such as “Celebrating the Second Season of the Year” are expected to be scheduled one after another. ① Movies:
“Hot and Hot” grossed 3.46 billion yuan and was the winner of the Spring Festival in '24. “Customs Front” is scheduled for the summer season 24, and “Under a Stranger” is expected to be launched in March 24; ② The TV series: “Celebrating the Years 2”, “Dabong Dabong: More People”, and “The Story of a Rose” will also be scheduled one after another. As of April 21, '24, the number of people who want to watch Tencent Video was 1339/251/1.6 million, respectively, leading expectations; ③ game:
The self-operated game “Battle for the Sky: A Three-Year Pact” was launched in early April '24; the self-operated game “Dafeng Fighter” obtained a version number in February '24; the company also has several IP-licensed games such as “The Son-in-law” and “Dora Continent: Reversal of Time and Space”; ④ Animation: The number of animations in 24 is expected to be over 23 years.
Tencent Animation is expected to be injected, bringing new growth momentum. On December 11, 2023, Reading Moon signed an asset transfer agreement with Tencent. The price is 600 million yuan (which may be reduced according to the reduction mechanism). The transferred assets include:
App platform assets (works published on the Tencent Animation app platform), animation projects, film and television projects, and 90% of Rice Orange's shares. Tencent Animation has many popular IPs, including “Under One Man” and “The Fox Demon Matchmaker”, etc., and the platform has IP incubation capabilities. After the acquisition is completed, Reading Text Group is expected to form a full IP chain for novels, animated comics, games, film and television, and derivatives.
AIGC's improved quality and efficiency is expected to help IP adaptation enter the fast track. The company's existing AI products include: Writer's Assistant Magic Pen Edition, AI Translation, Dream Island, etc. Currently, Writer's Assistant Magic Pen Edition products are fully open to contracted writers, and the monthly usage rate of the AI function has reached 30%. The Dream Island App, a virtual chat platform for emotional companionship, has begun commercial exploration. There are 21 AI-translated works in the top 100 WebNovel bestsellers list in 2023. Currently, translation efficiency has been increased by nearly 100%, and costs have been reduced by 90%.
Profit forecast and investment advice: The company's 2024-2026 non-IFRS net profit is estimated to be $1,399/14.7/1.55 billion, respectively. Taking into account: the company's IP year 24, injecting expectations into Tencent Animation, the continuous advancement of multiple AIGC projects, and the company's 1 billion yuan share repurchase plan in 24, etc., enjoyed a certain valuation premium and maintained a “buy” rating.
Risk warning: Risk of competitors increasing investment; risk of film and television projects falling short of expectations; risk of tightening online articles, film and TV drama policies; risk of overseas business expansion; risk of AI product development falling short of expectations.