Core views
1. The IP business grew rapidly in the first quarter
Revenue of 795 million yuan was achieved in '23, an increase of 85% over the previous year. Among them, theater-related revenue (including movie screenings, advertisements, sales, and distribution) was 691 million, an increase of 99% over the previous year (low base). IP-related revenue (IP licensing+other revenue) was $104 million, up 25% year over year. In the first quarter of this year, the company achieved revenue of 210 million, an increase of 18% over the previous year. In the absence of a low base in the cinema business, we believe that the main reason is that revenue related to IP licensing grew rapidly, driving overall revenue to continue to grow rapidly.
2. Boost in gross margin: Cinema refinement+increase in the share of IP revenue. On the one hand, the company drives the growth of pre-screening advertising and sales business through various initiatives such as cinema renewal and upgrading, cross-industry cooperation, and membership marketing, and actively negotiates rent terms with property parties to effectively reduce cinema operating costs and increase operating profits. Furthermore, the increase in the share of IP business revenue has also led to an increase in overall gross margin.
3. Look forward to the implementation of AI+IP and the launch of the main investment content
On the AI side, the company launched a global AI film competition to explore global AI video creative talents and renew more than 2 IP content every year. In terms of content, the big movies “China Strange Tan 2” and “The Summer of the Little Monster” are currently being produced by Shanghai Film Source as the main sponsor, and other classic IP adaptations such as “The Sloppy King” are expected to gradually launch.
We expect net profit of 260 million, 320 million, and 380 million in 24-26. The current PE valuation is 52.1x, 42.9x, and 35.7x. Considering the company's unique IP+AI layout and the scarcity of 30 national animation IPs, we are still actively recommending it.