Report summary:

Incident: Bona Pictures achieved operating income of 1,608 million yuan in 2003, down 20.06% from the previous year, achieving a net loss of 553 million yuan, a loss of 76 million yuan in the same period last year, a net loss of 743 million yuan without deduction to mother, and a loss of 197 million yuan for the same period last year. 2024Q1 achieved revenue of 440 million yuan, a year-on-year decrease of 16.10%, and realized net profit of 5.55 million yuan, loss of 108 million yuan in the same period last year, realized net loss of 14.2 million yuan without deduction to mother, and loss of 172 million yuan in the same period last year. In 2023, a total of $309 million was proposed for impairment of various assets.

Comment:

The main slideshow fell short of expectations, putting pressure on performance. The reserve content is rich and awaits the arrival of the product cycle. The company mainly invested in 2 main control films in 2023, “Unnamed” and “Bursting Point”, with a total box office of 1,031 million yuan, and 8 projectors, with a total box office grossing of 5.864 billion yuan. The company's performance was pressured by falling short of expectations. Film investment achieved revenue of 58 million yuan, -92% YoY, and film distribution achieved revenue of 402 million yuan, or -51% YoY. Currently, reserves are still rich. There are nearly 15 projects under development. The films to be broadcast include “The Legend” and “Red Mansion Dream: Golden Jade Love”, etc. The key films “Operation Jiaolong” are currently being filmed, and “Human Warfare” and “Princess Kashmir” are also in the preparation stage, so the next performance is worth looking forward to.

The cinema business has recovered strongly, and the market position is stable. In 2023, the company's cinema business achieved a total box office of 1,047 billion yuan, recovering 108% from 2019, with 24.29 million movie viewers, and achieving revenue of 1,218 billion yuan, an increase of 88% over the previous year. Along with the strong recovery of the film market, there was a marked improvement. At the same time, the company has a stable market position and maintained its expansion trend. In 2023, it joined 127 cinemas, a net increase of 9, with a market share of 2.26%, 108 its own cinemas, and 6 new ones. The total number of screens reached 892. The total number of screens reached 892. The 2023 box office revenue ranked 7th in the national film competition. Subsequent companies will, on the one hand, strengthen refined operations and diversify revenue to increase profitability while increasing revenue; on the other hand, they will continue to expand cinemas in unplanned provinces and cities to maintain market competitiveness.

The new curve of the series is gradually taking shape, and the copyright value can be expected in the future. The company's drama project “Shangganling” is expected to be screened in 2024, and “Haojiang Chaochong” and “Hunting Time” will also be launched in 2024. There are also many series in early development, and a new growth curve is gradually taking shape. In addition, the company has accumulated rich copyright and IP content over the years since its establishment. The digitization of film and television copyright assets was strengthened in 2023, and the space for revenue growth was broadened through diversified development such as IP licensing. With the gradual maturity of AI technology, the value of the company's rich copyright IP resources is expected to continue to be released.

Investment advice: The company is expected to achieve revenue of 21.62/32.03/37.22 billion yuan in 2024-2026, an increase of 34%/48%/16% over the previous year, and achieve net profit of 2.89/4.82/608 million yuan, a year-on-year increase of -/ 67%/26%. The corresponding PE is 31x/19x/15x, maintaining a “buy” rating.

Risk warning: Project launch progress falls short of expectations, box office performance falls short of expectations, competition intensifies