Incident: The company released its 2023 annual report and 2024 quarterly report. In 2023, it achieved revenue of 1,608 million yuan, YoY -20.06%, and net loss to mother of 553 million yuan; in the first quarter of 2024, it achieved revenue of 440 million yuan, YoY -16.10%, and net profit of 5.552 million yuan to mother, reversing the year-on-year loss.

The box office for the main project fell short of expectations, and short-term performance was under pressure. In 2023, the company screened the main investment and control films “Unknown” and “Bursting Point”, which grossed 1,031 million yuan at the box office, and participated in 8 presentations, with a total box office of 5.864 billion yuan. Due to the fact that the box office performance of the two films controlled by the main investors fell short of expectations, the company's movie business revenue in 2023 declined significantly compared to the same period last year. Among them, revenue from film investment business was 58.19 million yuan, and revenue from film distribution business was 402 million yuan. Based on 23 years of investment and business performance, the company readjusted the schedule of reserve film projects, retained the subject projects that the company excels at, suspended projects that did not meet market needs, actively developed new themes and types of projects, and guaranteed the continuity of schedule launch with echelon production.

The cinema business recovered strongly, faster than the industry's recovery level. In 2023, the company's cinema business achieved a total box office of 1,047 billion yuan, recovering 108% from 2019 and 24 percentage points higher than the market; the cinema business revenue increased 88.29% year-on-year to 1,218 billion yuan. By the end of '23, the company's cinemas had joined 127 theaters, a net increase of 9 over the previous year. Bona Cinemas ranked 13th in the country's box office revenue in '23, the same as the previous year, accounting for 2.26% of the market share (excluding service fees).

The project reserves are rich, and pay attention to the pace of launch. In terms of film projects, the company is currently creating and developing nearly 15 projects. The film “Legend” starring Jackie Chan and applying AI technology is scheduled to be launched in 2024; “Operation Jiaolong” (“Operation Red Sea 2”) has completed filming in the mainland; the blockbuster “Princess Kashmir” has completed the project and is expected to be launched in 2024; and the animated film “Battle of the Humans” directed by Xu Ke is also in the early stages of preparation. In terms of TV dramas, “Shangganling” has completed post-production and is expected to be broadcast within the year, and there are plans to launch “Chaocheng in the Haojiang River” and “Hunting Time”.

Profit forecast: The company's net profit for 24-26 is estimated to be RMB 329/4.87/587 million yuan, YoY +159.6%/47.7%/20.7%, maintaining a “buy” rating.

Risk warning: policy and regulatory risks; box office performance falls short of expectations; project progress falls short of expectations