occurrences
Aofei Entertainment announced that in 2023, the company's total revenue was 2.74 billion yuan (yoy +3.09%), total operating costs were 2,612 billion yuan (total cost control is better), and the return to mother and non-profits were 0.94 billion yuan and 56 million yuan respectively (both turned loss into profit); in 2023, the company's accrued asset impairment, credit impairment and asset write-off reduced the company's net profit by 62 million yuan. Looking at the single quarter, 2024Q1's revenue was 650 million yuan (yoy +7.98%), with net profit attributable to mother and net profit of 0.5 million yuan and 0.42 billion yuan (yoy +202.85% and 208.58%), respectively. Both revenue and profit increased in the single quarter; net operating cash flow in 2023 and 2024Q1 was 197 million yuan and 86 million yuan, a significant improvement.
Key points of investment
In 2023, the company's toy revenue increased 17.86% year on year, and the share of revenue increased to 42.6%. 24Q1 revenue and profit both increased
In 2023, the company's main revenue for toys, babies, animation, and television was 11.7 billion yuan, 1.07 billion yuan (yoy +17.86%, -7.95%, +1.4%), respectively. Looking at the revenue structure, the share of toy revenue increased from 37.28% in 2022 to 42.62% in 2023. Among them, the increase in toy revenue was due to increased revenue in gyroscope and trendy toy categories; it has launched works such as Super Flying Man, Happy Goat, and Balala Little Magic Fairy, under the “IP+ Toys” strategy, which is expected to bring growth potential in terms of product innovation and channel optimization. In the first quarter of 2024, the company's total revenue and profit due to mother both increased, and net operating cash flow improved, and the main business difficulties gradually reversed.
The core that uses IP as the fulcrum to bring commercialization is quality content
In 2023, the company's animated content continued to be intense. The company continued to build a premium IP matrix, with seasons 14-15, “The Goat and the Grey Wolf: Goat and the Goat Keeper” series, and “Hurricane Warlord: Gyroscope 2,” and also launched the new dinosaur mecha IP “Quantum Team: Dinosaur Protection”; in 2023, the company also launched the first Super Flying Man movie, “Superman: Rudi Accelerator”.
IP+X is expected to boost the new development of the toy business and AI business
As a leading Chinese animation toy company, we have built an “IP+ full industry chain” cooperation model that has accumulated many well-known IP images and developed in depth, from simple manufacturing and licensing to original and IP-based development. The year of AI begins in 2023, and 2024 is the year of implementation of AI applications. X in “IP+X” represents the sum of new explorations such as AI, toys, and external cooperation. On the “IP+AI” side, the company incubated the first AI twin digital human “Happy Goat”, and has also launched smart toys. Outside, companies such as Beijing Hongmian Xiaobing, Dolphin Media, and Lightyear Infinity are actively promoting the implementation of AI applications. With AI support, it is expected to drive the transformation of the company's new IP commercialization model and accelerate innovation and development in the main business.
Profit forecasting
After being pressured by internal and external stress tests in 2020-2022, the company's performance turned a loss into a profit in 2023. The company's revenue for 2024-2026 was 28.79 billion yuan, 30.95, and 3.375 billion yuan, respectively. The current stock price corresponds to PE of 53.0, 35.8, and 26.9 times, respectively. The reversal of the company's main business dilemmas is gradually showing, with the launch of AI applications. With IP as the fulcrum (the company has covered the IP matrix for all age groups), it is expected to leverage toys, With the support of licensing and other businesses, AI is expected to give the company various forms of vitality to its IP, help its IP commercial value shine again by creating new content, constructing new scenarios, and triggering new consumption, thereby maintaining a “buy” investment rating.
Risk warning
Market competition increases risk; risk of IP development falling short of expectations; risk of impairment of goodwill due to poor performance; management risk due to rapid business expansion; risk of sales of new toys falling short of expectations; risk of insufficient human resources; risk of impairment of accounts receivable and credit assets; risk of project cost control risk and management risk of project implementation; risk of innovative business development falling short of expectations; risk of falling short of expectations in application of new technology; risk of macroeconomic fluctuations.