Key points of investment:

Due to the influence of the movie market, 2024Q2 results are under pressure in the short term:

(1) 2024H1's revenue was 1.166 billion yuan (YOY -0.52%), net profit due to mother 0.088 billion yuan (YOY -21.65%), net profit of non-return to mother 0.015 billion yuan (YOY -79.57%); non-recurring profit and loss of 0.073 billion yuan, mainly non-current asset disposal gains and government subsidies.

2024H1 gross profit margin 13.48% (YoY -4.79pct), net profit margin 7.59% (YoY -2.04pct), and period expense ratio 7.27% (YoY -0.48pct).

(2) 2024Q1/Q2 revenue 0.842/0.323 billion yuan (YOY +13.50%/-24.76%), net profit to mother 0.219/ -0.13 billion yuan (YOY +46.43%/-256.98%). Seasonal performance fluctuations are affected by the movie market. According to Cat Eye, 2024Q1/Q2 national box office (excluding service fees) 14.934/6.696 billion yuan (YOY +3.14%/-28.13%), directly managed by the company The hospital box office was 0.573/0.242 billion yuan (YOY +5.65%/-25.07%).

Cinemas are expanding steadily to strengthen non-ticketing business:

(1) Steady expansion of cinemas: 2024H1's film screening business (including non-ticket business) revenue of 1.014 billion yuan (YOY -6.3%). As of the end of 2024H1, the number of theaters/screens directly managed by the company was 445 houses/2,842 blocks, an increase of 13 or 85 blocks over the end of 2023. According to the cat's eye.

2024H1's direct-managed cinemas achieved box office (excluding service fees) of 0.816 billion yuan (YOY -5.82%), with a market share of 3.77% (0.13pct increase over the previous year).

(2) Promote non-ticket business and diversify to increase revenue. Traditional sales have been introduced, popcorn categories have been added, a number of well-known IP derivative peripheral products have been introduced, and our own card business has been designed and developed. Steadily promote the expansion of independent water bars, explore independent store business models based on first-floor sales offices in cinemas and high-quality commercial stalls, etc., and innovate a variety of popular teas.

The film and television investment and production business is developing rapidly, and the main investment and control of films is gradually increasing:

The 2024H1 film and television production and distribution business had revenue of 0.152 billion yuan (YOY +69.13%), and participated in 8 titles including “Flying Spaces 2,” “The Bear: Reversing Time and Space,” and “Article 20,” totaled over 9 billion yuan. The summer program participated in “Murder,” “Welcome to Me,” “Under a Stranger's Side,” and “White Snake:

“Ukisho” and others have grossed over 1.8 billion yuan in total (as of August 28). Participated in the 2024 Mid-Autumn Festival program, such as “I Wish You Happiness,” “The Decision to Run Away,” and “The Big Scene.” Other reserve films include “Path of the Tiger and Wolf,” “Legend of Heroes: Legend of Heroes,” and “A Cloud Is Like You”.

Profit forecast and investment rating: We forecast the company's revenue for 2024-2026 to be 2.238/2.61/2.871 billion yuan, net profit to mother 0.149/0.232/0.294 billion yuan, and the corresponding PE is 44/28/22X. As the film projection industry gradually clears up and the company expands steadily, the market share is expected to continue to increase, and investment in film and television content production is developing rapidly, gradually increasing the main investment and control of films. Based on this, the “buy” rating is maintained.

Risk warning: Risks such as stricter policy supervision, box office recovery falling short of expectations, risk of falling short of expectations in film production costs/project development process/revenue recognition, inventory impairment, loss of core talent, impairment of accounts receivable, industry competition, declining valuation centers, and market style changes.