Introduction to this report:
The 24Q1 company achieved net profit of 46 million yuan, an increase of 28.2% over the previous year, and the performance exceeded expectations. Looking back, the “Cinema+” innovation model is expected to consolidate the main business advantages, film and television reserves hope to revitalize IP, and AI+IP applications can be expected to be implemented.
Key points of investment:
The “AI+IP” strategy is advancing at an accelerated pace, and the “gain” rating is maintained. Considering changes in income tax policies and the impact of changes in the movie market, we fine-tuned the 24-25 EPS forecast to 0.55/0.79 yuan (previous value was 0.63/0.81 yuan) and added a 26-year EPS forecast value of 1.04 yuan. Given the company's strong growth in the new IP development business, active promotion of AI+IP application implementation, and the 24-26 net profit CAGR expected to reach 54%, we believe that the company should enjoy a premium over comparable companies. We will give 45X PE in 2025, raise the target price to 35.5 yuan and maintain it. “Accumulation” rating.
Incident: On April 26, the company released financial reports for 2023 and 2024Q1. The full year of 2023 achieved revenue of 795 million yuan, up 85.1% year on year, and realized net profit of 127 million yuan, up 138.7% year on year; 2024Q1 achieved revenue of 210 million yuan, up 18.3% year on year, achieved net profit of 46 million yuan, up 28.2% year on year, and 2024Q1 performance exceeded expectations.
The “cinema+” model hopes to reshape movie-watching consumption habits and continuously consolidate the advantages of the main cinema business. In 2023, the company's directly-managed cinemas achieved box office of 632 million yuan (including service fees), a year-on-year increase of 129.7%, and the market share increased 0.25pct to 1.17% year over year. Shanghai Cinema SHO was renovated and upgraded in June 2023. As the company's “Cinema+” flagship store, it has hosted nearly 150 innovative events such as movie parties and premieres, effectively driving the rapid growth of the box office and non-ticket business.
Enriching film and television reserves is expected to revitalize IP, and AI movie marathons hope to accelerate the implementation of AI+IP applications. The holding subsidiary Shangyingyuan, as the main sponsor, has officially launched a number of film and television productions, including “China's Strange Tan 2”, “The Summer of the Little Monster” movie, and other classic IP adaptations, which are expected to continue to enhance the company's influence in the IP market, thereby promoting product and marketing licensing, game linkage, and licensing business growth. The “Global AI Film Marathon” hosted by the company will officially start on April 29. The competition is rich in prizes. The aim is to recruit high-quality AI film talents and film and television venture capital projects to promote the faster implementation of AI+IP.
Risk warning: IP commercialization falls short of expectations, movie box office falls short of expectations, etc.