The company's revenue increased 6.6% in 2023, and profits for the first quarter of 2024 were affected by tax policies. 1) In 2023, the company's revenue was 1.52 billion yuan, up 6.6% year on year, mainly due to steady operation of IPTV, Internet audiovisual, and content copyright businesses; gross margin decreased 1.9 percentage points to 51.9% year on year; overall expense ratio decreased 1.6 percentage points to 5.0%; and net profit to mother was 710 million yuan, up 2.4% year on year. 2) In the first quarter of 2024, the company's revenue was 400 million yuan, up 12.3% year on year; net profit to mother was 150 million yuan, down 13.2% year on year, mainly because the company no longer enjoyed tax exemptions.
The main IPTV and Internet audiovisual industries are progressing steadily, and the content copyright business is exploring new models. By business: 1) In terms of IPTV's basic business, revenue in 2023 was 8.1 million, up 9.1% year on year, and the number of effective users decreased 1.7% year on year; 2) In terms of Internet audiovisual business, revenue in 2023 was 61 million, up 7.3% year on year. Among them, IPTV value-added and Internet TV were 40/210 million, +7.0%/+8.0% year on year. The company continued to improve member rights and diversified content supply. By the end of 2023, the number of active users of the Cloud Audiovisual series apps nationwide was 250 million 100 million households, +5%; the number of effective smart terminals reached 21.72 million, +22% year over year; 3) The content copyright business was affected by the cyclical and uncertain nature of copyright investment and returns, and revenue fell 15.0% to 89 million yuan.
Continue to consolidate the main IPTV business and continue to open up new tracks. 1) On the technical side, the company cooperated with the Guangzhou Academy of Science and Technology, Huawei, iFLYZ, Huazhong University of Science and Technology to develop innovative metaverse applications such as virtual humans and voice interaction. 2) On the content side, the company continues to create an educational content matrix for TV series, variety shows, children, and silver hair. The TV drama “Pearl River People”, which participated in the investment, was broadcast on IPTV in 16 provinces, the first IPTV family sitcom “Happy Family”, which was produced in collaboration, was broadcast on IPTV in 16 provinces, and homemade content for the comprehensive cultural education product “Changchun Yinfa” continues to be launched. 3) The company is currently the leading content integration platform in China, and will build a content production platform to broaden the commercial landscape in the future. The company will continue to track industry trends and hot topics, capture content creation opportunities in a timely manner, use data analysis tools to understand user preferences, optimize content creation direction, use technical support to improve content quality, use advanced content management systems to improve content production efficiency, and use artificial intelligence technology to assist content creation.
Risk warning: The content copyright business reduces gross profit margin; IPTV growth peaked; user expansion falls short of expectations.
Investment advice: The company's main business is steady, continues to develop new tracks, and maintain the “gain” rating. The company's core business is progressing steadily, but due to the increase in the corporate tax rate from 2024, we lowered our profit forecast. We expect net profit to be 6.33/6.79/728 million for 2024-2026 (net profit for 24/25), a year-on-year growth rate of -11%/7%/7%; diluted EPS = 2.74/2.94/3.15 yuan. The current stock price corresponds to PE=14/13/12x for the same period, maintaining the “gain” rating.