The 2023 and 1Q24 results were largely in line with our expectations
The company announced its 2023 and 1Q24 results: revenue in 2023 was 2,434 billion yuan, down 0.3% year on year; net loss to mother was 172 million yuan, which changed from profit to loss; net profit after deducting non-return to mother was 16.15 million yuan, turning a year-on-year loss into a profit. The company's 1Q24 revenue was 530 million yuan, up 0.9% year on year; net loss due to mother was 9.28 million yuan; net profit after deducting non-return to mother was 16.6 million yuan, turning a year-on-year loss into a profit. The company announced that it plans to distribute a cash dividend of 0.27 yuan (tax included) for every 10 shares in 2023, for a total cash of 37.57 million yuan (tax included).
Development trends
The traditional cable TV industry continues to be under pressure, and it is still necessary to observe the development of innovative businesses. On December 31, 2023, the company had 3.9062 million cable TV payers, 3.6739 million high-definition interactive subscribers, and 449,500 broadband payers; the number of radio and television mobile users in Beijing reached 1.1356 million, of which 465,500 were fixed-mobile users. We believe that the traditional cable radio and television industry is still under pressure in 2023, and the company faces problems such as loss of users, increased costs, declining profits, undeveloped innovative businesses, and the need to improve the technical level of network products and basic network carrying capacity.
The 1Q24 business is still recovering, and fair value changes have caused losses due to falling Guiguang Network's stock prices. The company's 1Q24 revenue increased slightly year over year. Under strict cost control, gross margin was 14.1%, up 2.8ppt year on year. Due to the sharp drop in the share price of Guiguang Network, the financial assets held by 1Q24, the company lost 34.45 million yuan due to changes in fair value for the current period (same period last year: loss of 61.11 million yuan). After excluding non-recurring profit and loss such as government subsidies and changes in fair value, the company's net profit deducted from non-return to mother in 1Q24 compared to the same period, and turned loss into profit month-on-month.
Follow the integrated development of the “cable+5G+ government enterprise” business. The company stated in its 2024 announcement that it plans to further implement the “two governance” work, continue to improve the overall experience of users to boot and watch TV, enhance the attractiveness and competitiveness of cable TV, promote the integrated development of the “cable+5G+ government enterprise” business, reduce costs and increase efficiency, and promote the company's transformation and upgrading and high-quality innovative development. We recommend focusing on the progress of 5G commercial use in the radio and television industry and the development space for related new businesses.
Profit forecasting and valuation
We keep our net profit forecast unchanged for 2024 and 2025. The current price corresponds to 28/27.1 times 2024/2025 P/E. Maintaining a neutral rating and target price of 7 yuan, corresponding to 30/28 times 2024/2025 P/E, there is 5.4% upside compared to the current stock price.
risks
State Grid integration and 5G commercial progress in radio and television fell short of expectations, industry competition intensified, and user retention declined.