The national movie box office picked up, and the overall operation of the company improved in 2023. Hengdian Film and Television has a complete film industry chain. The main revenue comes from film and television investment, production and distribution revenue, film screening revenue, sales revenue, and advertising revenue. In 2023, the company's total revenue was 2.35 billion yuan (+64.6% YoY); consolidated gross profit margin of 14%; net profit attributable to mother of 170 million yuan (turning loss into profit); net profit of 73.82 million yuan after deducting loss to profit; net cash flow from operating activities of 750 million yuan (+138.7% YoY).
The film investment market continues to rank 2nd, and has expanded its scale advantage to vigorously develop the non-ticketing business. In 2023, the company's cinema screen business revenue was 2.13 billion yuan (+73.41% year over year), and the gross profit margin was 11.6% (+29.5pct year on year). According to Cat's Eye data, in 2023, the net box office of national movies was 49.92 billion yuan (+83% year over year), and the company's own cinemas grossed 1,805 billion yuan (+82% year over year), accounting for 3.62% of the film investment market. In 2023, the company opened 23 new cinemas and shut down 6 cinemas. By the end of 2023, the company had a total of 514 cinemas already opened, including 432 asset-related cinemas, continuously improving its scale advantage and special cinema layout.
At the same time, its cinemas have set up traditional sales, advertising, water bar and supermarket chains, interactive entertainment experiences, etc., with a differentiated layout in different regions, continuously increasing the city's non-ticket business revenue.
Continuously improve film and television project management and market operation capabilities, and actively explore new business directions such as short dramas and cultural tourism.
In 2023, the company's film and television production and distribution business revenue was 150 million yuan (-6.7% YoY), with a gross profit margin of 9.7% (-16.3pct). The company's film and television production and distribution business relies on the accumulation of the film and television industry, integrates industry professional resources, stably develops high-quality content creation, investment and promotion, emphasizes risk control, and continuously improves film and television project management and market operation capabilities. Hengdian Pictures, a wholly-owned subsidiary, launched a key film business. In 2023, it participated in and screened a total of 19 movies. Among them, it participated in the production of “Wandering Earth 2,” “The Bear Called Me,” and “Life Is Unfamiliar”, which entered the top 10 national box office this year. The wholly-owned subsidiary Hengdian Film and Television produces a number of TV series and web dramas, and is actively exploring a new “entertainer+cultural tourism” cooperation model to carry out high-quality cultural tourism projects unique to Hengdian film and television culture. In 2024, the company will steadily promote the film and television project production business, gradually increasing the investment output of the main investment and control film; promoting the incubation of original projects to explore the short drama market; and not limited to traditional film and television business types, and striving for strength on multiple tracks.
Profit forecasting and valuation. We estimate that in 2024-2026, the net box office of national movies will be 51.42 billion yuan, 555.3 billion yuan and 58.86 billion yuan respectively, up 3%, 8%, and 6%, respectively; the total box office will be 56.68 billion yuan, 61.32 billion yuan and 65.12 billion yuan respectively, with year-on-year increases of 3.2%, 8.2% and 6.2%, respectively. Our forecast for the company's sub-business is as follows: 1) Cinema screening sector: the company will open 23 new direct-run cinemas in 2023, the 2024Q1 company will open 11 new direct-run cinemas and shut down 1 cinema. The company is expected to build 25 cinemas in 2024-2026, and shut down 3, 2, and 2 cinemas respectively; in 2023 and 2024Q1, the company's own cinemas will account for 3.62% and 3.85% respectively. It is estimated that 2024-2026 will account for 3.70%, 3.75%, and 3.75% of the box office of its own cinemas 3.80%, up 0.08 pct, 0.05 pct, and 0.05 pct; in 2023, we estimate that the company's cinema revenue is 3.7 yuan per capita, and the average sales revenue of cinemas in 2024-2026 is 3.8 yuan, 3.9 yuan, and 3.9 yuan, respectively, up 0.1 yuan, 0.1 yuan and 0 yuan; in 2023, we estimate the company's cinema single-screen advertising revenue of 30,000 yuan, and 3.3 yuan respectively 10,000 yuan, an increase of 0.1 million yuan, 0.1 million yuan, and 0 million yuan over the same period last year. The overall forecast is that in 2024-2026, the company's cinema screening segment revenue will be 2.57 billion yuan, 2.83 billion yuan and 3.03 billion yuan respectively, with year-on-year growth rates of 20.6%, 10.3% and 6.9%, respectively. 2) Film and television production and distribution sector: We estimate that in 2020-2023, the company's participating movie box office accounted for 14.6%, 17.5%, 31.3%, and 24.4% of the total box office of films, respectively, and film and television investment revenue accounted for 1.6%, 2.8%, 1.7%, and 1.1% of the participating movie box office respectively; it is estimated that in 2024-2026, participating movies will account for 25% of the box office of participating movies; as participation in films intensifies, we expect film and television investment revenue to account for 1.3%, 1.7%, and 2.0% of the total box office of participating movies, respectively . The overall forecast is that in 2024-2026, the company's film and television production and distribution segment revenue will be 180 million yuan, 260 million yuan and 330 million yuan respectively, with year-on-year growth rates of 23.1%, 41.5% and 24.9%, respectively.
Overall, we expect that in 2024-2026, the company's total revenue will be 2.83 billion yuan, 3.17 billion yuan and 3.43 billion yuan, respectively, with year-on-year growth rates of 20.3%, 12.1% and 8.3%; net profit to mother will be 350 million yuan, 4.4 million yuan and 5.2 billion yuan respectively, with year-on-year growth rates of 111.1%, 26.5% and 17.1% respectively; corresponding fully diluted EPS of 0.55 yuan/share, 0.70 yuan/share and 0.82 yuan/share, respectively. 2024Q1, the company's total revenue was 850 million yuan (+13.5% year over year), net profit attributable to mother was 220 million yuan (+46.4% year over year), and net profit without return to mother was 150 million yuan (+13.6% year over year). Referring to the comparable company's 2024 PE valuation, considering the company's flexible growth and innovative business exploration, the company was given a 30-35 times PE valuation in 2024, corresponding to a reasonable value range of 16.50 yuan/share - 19.25 yuan/share, which is “superior to the market” rating.
Risk warning: The national movie box office growth rate falls short of expectations, and participation in film and television content projects falls short of expectations