24H1's net profit is expected to be 0.1-0.13 billion yuan, down 69.25%-76.35%. The company released the 24-year H1 performance forecast: net profit to mother is estimated to be 0.1-0.13 billion yuan, a decrease of 69.25%-76.35%; net profit not attributable to mother is 0.071-0.101 billion yuan, a decrease of 75.67%-82.9%. Of these, Q2 is expected to have a net loss of 0.196-0.226 billion yuan to mother. The main reason for the decline in 24H1 performance was that the national movie box office fell by about 29% in Q2, causing the company's theatrical business to lose money. We believe that the national box office declined mainly due to a decrease in the supply of leading movies, and it will take time to recover. Based on this, net profit from 24-26 was adjusted to 7.69/14.5/16.39 (previous value: 14.17/17.84/20.13) billion yuan, EPS 0.35/0.67/0.75 yuan. Considering that the industry may be under pressure in 24 years, based on a valuation basis, the company Wind agreed to expect PE 20X to become the company's leading position (first in screening market share, high operating efficiency, and partnership with Ruyi) Double PE, target price is 14.07 yuan (previous value 18.85), maintaining the “buy” rating.

The decline in performance was mainly due to Q2 industry factors. The company's theatrical business loss 24H1 performance decline was mainly affected by Q2. Q1 net profit to mother was 0.326 billion yuan, an increase of 3.25% over the same period. The estimated net loss for Q2 is 0.196-0.226 billion yuan, mainly due to the impact of the theatrical line business. According to performance forecasts, due to insufficient supply of leading films, the box office of national movies in 24 Q2 was 7.42 billion yuan, down 28.7%, or only 58.5% in the same period in '19; the number of movie viewers was 0.18 billion, down 31.2%, or only 55.8% in the same period in '19.

The company's 24Q2 domestic box office was 1.03 billion, down 32%. At the same time, due to the overall decline in the overseas film market, the box office revenue of the company's Australian cinema line has also declined, while fixed costs such as operating rent and depreciation of cinemas are high. As a result, the company's cinema business lost money in Q2.

24H2 has an extensive stock of films, and the leading project “Catching the Doll” is about to be screened in the 24th summer program “Catching the Doll”, “Retrograde Life”, “Under Stranger Things”, “Declassified”, “Legend”, “White Snake: Floating”, “Despicable Me 4”, “Deadpool and Wolverine”, etc., which is expected to release demand for movies, drive a recovery in the big box office, and have a positive impact on the company's cinematic operations. At 24H2, the company also has plenty of film reserves. The production and distribution films “Catch the Doll” (starring Shen Teng and Ma Li) and “White Snake: Floating” are scheduled to be screened on July 16 and August 10. “Murder” is currently being screened (Cat's Eye Pro Edition predicts 1.38 billion in box office), and “Under a Stranger” and “Demystified” will be screened on July 26 and August 3. In addition, films such as “Accidental Killing 3,” “There Are Clouds Like You,” and “Tricking” to Like You, produced by the company are also expected to be screened within the year, and the company's content-side performance is also expected to improve further.

Join hands with Confucius and look forward to strong alliances to unleash synergy

In December '23, Ruyi Investment took over 51% of the shares of the controlling shareholder Wanda Investment, and the change was completed in April '24. Together with Confucius, “New Wanda” officially set sail. We believe that the pressure on 24H1's performance is mainly due to the influence of the movie market. Without changing the company's development logic, the “New Wanda” development strategy may follow: 1) increasing the domestic theater market share; 2) promoting the expansion and strengthening of the content business; 3) vigorously developing derivatives to increase non-ticket revenue. We look forward to strong alliances between the two sides to unleash synergy and open up new development space for Wanda Films.

Risk warning: Demand for movie viewing is weak, project progress falls short of expectations, etc.