Key points of investment

Incident: In 2023, the company achieved revenue of 1.61 billion yuan, a year-on-year decrease of 20.06%; net profit to mother was -550 million yuan, a year-on-year decrease of 631.86%. In 24Q1, the company achieved revenue of 440 million yuan, -16.1% year-on-year; net profit to mother was 5.55 million yuan, an increase of 105.1% over the previous year.

In '23, the main control films were “Unnamed” and “Bursting Point”. In the future, they will actively explore new genres and genre projects. In 2023, the company screened the main investment control films “Unknown” and “Bursting Point”, which grossed 1,031 billion yuan; it participated in 8 films, with a total box office grossing of 5.864 billion yuan. The company's film investment business revenue was 58.19 million yuan, down 91.66% year on year; distribution business revenue was 40 billion yuan, down 50.7% year on year. In the future, the company will readjust the schedule of reserve film projects and actively explore new themes and types of projects, and performance recovery can be expected.

Thanks to the restoration of the movie market, the cinema business recovered rapidly compared to the previous year. In 2023, the total box office of national movies was 54.915 billion yuan, an increase of 82.64% year on year, and has recovered to 85.45% in 2019.

In 2023, the company's cinema business achieved a total box office of 1,047 billion yuan, recovering 108% from 2019; benefiting from the restoration of film supply and the normalization of film scheduling, the cinema business revenue reached 1.22 billion yuan, an increase of 88.29% over the previous year. By the end of 2023, the company's cinemas had joined 127 cinemas, including 101 cinemas owned by the company and 26 outside participating cinemas; Bona Cinemas accounted for 2.26% of the market share of box office revenue (excluding service fees).

We look forward to the release of the reserve project and the restoration of performance. The company has a wealth of film projects in reserve, with nearly 15 projects under creation and development. The blockbuster IP sequel “Operation Jiaolong” has completed filming in the mainland and moved to Hong Kong, China; the film “Legend” starring Mr. Jackie Chan and applying AI technology will be screened in 2024; the animated film “Human Battle” directed by technical director Xu Ke is in the early stages of preparation; the blockbuster “Princess Kashmir” has completed the project and is expected to launch in 2024. The company's film reserve project is sufficient and will continue to support the film business. As key projects are gradually released, the company's performance is expected to recover.

Profit forecast and investment rating: The company has abundant film reserves, film production is mature, and performance is expected to gradually recover as key projects are released. Taking into account the company's film content schedule, we lowered the 2024-2025 net profit of 41/60 million yuan to 27/40 million yuan, and the estimated net profit to the mother in 2026 is 550 million yuan. We are still optimistic about the company's film production capacity and box office space, and maintain a “buy” rating.

Risk warning: investing in movie box office falls short of expectations, market competition risks, movie release pace falls short of expectations