The company's operating income in 2023 was 14.620 billion yuan, an increase of 50.79% over the previous year. Net profit to mother was 912 million yuan, and net profit not returned to mother was 719 million yuan after deduction, all of which achieved significant losses to profits.
2024Q1's revenue was $3,821 million, up 1.70% year on year; net profit to mother was 326 million yuan, up 3.25% year on year, and net profit after deducting net profit of 307 million yuan, down 15.31% year on year.
Key points of investment:
The overall film market is recovering well. The total box office of the domestic film market in 2023 was 54.915 billion yuan, up 83.4% year on year, reaching 85.64% in 2019; the number of movie viewers was 1,299 billion yuan, up 82.5% year on year to 75.17% in 2019; the total box office of the 2024Q1 domestic film market was 16.35 billion yuan, up 3.0% year on year, and 360 million movie viewers, up 8.1% year on year. The domestic film market is recovering well.
The leading position in the screening business industry is stable, and profitability has rebounded markedly. In 2023, the company's movie revenue was 8.445 billion yuan, up 56.89% year on year, gross profit margin 4.32%, up 15.20 pct year on year. The company's domestic direct-run cinemas achieved box office of 7.56 billion yuan and 186 million movie viewers, recovering to 96.4% and 92.7% in 2019, respectively. The recovery situation is better than the overall domestic market. Among them, North China and Northwest China have surpassed the same period in 2019. The company's cumulative market share is 16.7%, ranking first in the industry for 15 consecutive years. Among them, direct-run cinemas have a market share of 15.1%, an increase of 2 pcts compared to 2019, and single-screen output is 1.85 times the national average. 2024Q1's domestic cinemas achieved box office of 2.1 billion yuan, a year-on-year decrease of 2.6%; the number of movie viewers was 48.18 million, up 4.4% year-on-year, with a market share of 16.5% and a market share of directly managed cinemas of 14.2%. According to the company's disclosure, the company will seek to expand its market share in various ways, with the goal of increasing the market share to more than 20%.
The company's overseas screening business has also been steadily recovering. The subsidiary Australian cinema line achieved box office of 1,401 billion yuan in 2023, an increase of 13% over the previous year, and the number of moviegoers was 16.15 million, an increase of 5.5% over the previous year.
2024Q1 achieved box office of 315 million yuan, an increase of 9% year on year, and the number of moviegoers was 3.695 million, an increase of 11.7% year on year.
Expanding quality cinemas by putting emphasis together. As of the end of 2024Q1, the company had 929 open cinemas with 7,720 screens, including 708 direct-run cinemas, 6145 screens, 221 asset-light cinemas, and 1,575 screens, an increase of 4 to 35 blocks/100 to 713 blocks at the end of 2022, respectively. Increase business format plans for newly built direct-run cinemas, increase effective area ratio, improve operating quality, empower asset-light cinemas throughout the entire process of mid-term development and late operation of early-stage plans, improve operating efficiency, and increase revenue.
The sales and advertising business grew significantly. Through actively developing a product circuit and strengthening IP acquisition and operation, the company's product sales business revenue was 1,944 billion yuan, an increase of 39.60% over the previous year, a gross profit margin of 64.22%, and an increase of 2.83 pcts over the previous year. By increasing customer marketing management, actively signing new customers, and strengthening marketing planning, etc., the company's advertising business revenue in 2023 was promoted to 1,324 billion yuan, an increase of 8.35% over the previous year, and a gross profit margin of 48.22%, an increase of 9.56 pcts over the previous year.
l The content business has rebounded sharply, and more than 2024 projects are underway. In 2023, the company mainly invested in 5 films and participated in investing in many films such as “Wandering Earth 2”. Although revenue from film investment, production and distribution business declined by 12.06% year on year, gross margin increased by 50.65 pcts year on year to 45.71% year on year. The Spring Festival movies “Article 20” and “Bears Came: Reversing Time and Space”, which were co-produced by 2024Q1, achieved good investment returns. In the 2024 film project, “Peace and Riot Force” and “Journey Through the Moon” were screened on May 1st. “I Don't Want to Be Your Friends” and “White Snake: Floating” are scheduled for June and August respectively, and films such as “Accidental Killing 3,” “There Are Clouds Like You,” “We Live in Nanjing,” and “Tricking to Like You” are being filmed and produced as planned.
In 2023, the 4 series invested and produced by the company were broadcast one after another. The TV drama production and distribution business revenue was 742 million yuan, an increase of 388.53% over the previous year, and a gross profit margin of 19.15%, an increase of 43.56 pcts over the previous year. At the same time, the series “Legend of Sword and Fairy 4,” “From the South to the North,” and “The Wind Chaser” were also broadcast successively in 2024Q1. Follow-up, “Misplaced”, “The Square Pavilion”, and “My Altay” are expected to be broadcast in 2024, and series such as “Zheng Qingchun,” “The Prosecutor and the Teenager,” and “Confessions in the Dark Night” are being actively promoted.
l Investment advice and profit forecast: The company completed changes in equity and management in 2024. The new management also has rich experience in the film and television content industry, and is expected to bring new development opportunities to the company on the basis of maintaining the company's original business advantages. The company's EPS is expected to be 0.61 yuan, 0.73 yuan, and 0.87 yuan in 2024-2026. According to the closing price of 13.89 yuan on May 8, the corresponding PE is 22.85 times, 18.95 times, and 15.95 times, maintaining the “increase” investment rating.
Risk warning: Film market box office and number of movie viewers fall short of expectations; film and television project market performance falls short of expectations; industry competition intensifies; risk of impairment of goodwill