Chinese film: the layout of the entire industry chain, the leading position is unbreakable. China Film was founded in 2010. For the purpose of stock reform and listing, China Film Group transferred high-quality resources from various sectors such as production, distribution, screening, and service to Chinese films in the form of equity transfers. As a result, China Film formed a full industry chain business layout covering business sectors such as film and television production, film distribution and marketing, film screening, and film and television services. In 2021, the company rearranged its business system and formally formed a business structure in six major sectors: creation, distribution, screening, technology, service, and innovation, to comprehensively build a core competitiveness for the future.

The three major sectors of creation, distribution, and screening are core advantage sectors, and the market share remains high. Creation section:

With rich experience in content production, the company led or participated in the production of films in 2023, accounting for 58.45% of the domestic film box office. Distribution sector: The participation of imported films and domestic films is high. In 2023, films dominated or distributed by the company accounted for 82.93% of the total box office for the same period (with Chinese films accounting for 85.54% of the market and 68.90% for imported films). Screening sector: In 2023, controlled participation in cinemas achieved 25.20% of the total box office for the same period, covering a total of 21,577 screens across the country, with a market share of 27.91%.

The three major sectors of technology+service+innovation are closely linked to advantageous sectors and are growing rapidly driven by scale effects. Technology sector: Promoting the CINITY domestic high-format film system. The technology has received international recognition. It has closely cooperated with Chinese and foreign commercial blockbusters. The “China Film Comprehensive Business Service Platform” has completed infrastructure development, and has signed 49 cinemas and connected to 3,500 cinemas. Service sector: In 2023, the China Film Base provided production services for a total of 443 film and television productions. The China Film Cloud platform has 15.4523 million registered users and connected to 11,190 cinemas, exceeding 85% of the total number of cinemas in the national film market. Innovation section: China's sci-fi movie park is under construction.

Benefiting from the recovery of the film market, procyclical restoration went hand in hand with the revaluation of central state-owned enterprises. The company will benefit from 1) the continued recovery of the film market, and the business is expected to recover in a cyclical cycle; 2) the supply of content is increased, and the company has the advantage of a distribution license for imported films, benefiting from the increase in the distribution of imported films; 3) As a leading media state-owned enterprise, the company is shouldering the mission of a strong Chinese film industry and is expected to benefit from the revaluation of state-owned enterprises.

Investment advice: The company's revenue for 2024-2026 is expected to be 61.48/70.43/8.058 billion yuan, and net profit to mother is 6.50/7.78/881 million yuan, with outstanding growth. The 6-month target price is 14.0 yuan, which is equivalent to a dynamic price-earnings ratio of 40x in 2024, given an investment rating of +A.

Risk warning: The market recovery fell short of expectations, the introduction of imported films fell short of expectations, and the movie box office fell short of expectations.