TV program production became the focus of growth in 2024: “Journey 2” was officially launched on Zhejiang TV and Netflix in the fourth quarter of 2023, and recorded TV program production revenue of 84.14 million yuan in 2023, but since half of the episodes were broadcast in 2024, it is expected that 2024 will also include part of the revenue from “Journey 2” (approximately RMB 80 million), driving revenue expansion.
Looking ahead to 2024, the music program “Happy Lelai” hosted by Yu Chengqing was broadcast in June of this year. The plan is to launch a program related to the Paris Olympics starring Liu Yuhong, and the launch of a new season of the “Travels” TV program (“Traveller 3” has already begun recording) on a yearly basis, all of which will drive revenue expansion in 2024.
Using star resources to empower multiple business lines: In addition to relatively mature celebrity IPs such as Jay Chou, Liu Yuhong, and Vivi, the company signed a contract with Chen Farong and Sun Yaowei in 2023. In 2024, the company will accelerate the development of the IP business around the following tasks: (1) event planning: planning and hosting a national tour of Sun Yaowei and Nan Quan's mom, and increasing investment in Jay Chou's concert to increase the revenue in 2024; (2) Star management: in addition to the existing live broadcast room, new live broadcast rooms will be set up around newly signed star resources to drive revenue growth through live streaming and short video shooting; (3) Licensed product sales: the company will set up vending machines around Jay Chou's concert to win the expected love and anticipation of fans A significant increase was recorded.
Empowering the AI Business to Empower Star IP: On June 6, 2024, Superstar Legend announced that it has established a joint venture with Digital Kingdom (mainly engaged in visual effects and virtual human business), each holding 40% of the shares. The main business includes AIGC production, distribution, and commercialization, and the use of AI to create virtual idols. Furthermore, Jay Chou's video ringtone, co-launched by Superstar Legends and Migu Music, is also the company's bold exploration of combining AI with star IP. The future creation of joint ventures in the AI field and the “AIGC+IP” development strategy are expected to create a new growth curve for the company.
IPO capital raising: Superstar Legends completed the placement of 31.45 million shares (equivalent to 3.77% of the expanded share capital) on May 2, raising a total of HK$220 million. Among them, Cornerstone investor Zhang Yuan increased his holdings by a total of 30 million shares, showing that Cornerstone investors affirm the company's business development strategy and expectations for the company's future.
Raise the target price and maintain the “buy” rating: Although the company's 2023 performance fell short of our expectations, we believe that the company's 2024 production of many new TV shows, star IP management, and event planning, as well as the company's expansion in the AI field, will drive rapid revenue growth. We lowered our 2024-2025E profit forecast and raised our target price to HK$13.9 based on the DCF valuation model (WACC: 7%, sustainable growth rate: 5%) to maintain the “buy” rating.
Investment risk: Industry demand is slowing; TV shows are not launched as expected.