Description of the event

Wanda Film revealed its 2024 mid-year report. The company's 24H1 achieved revenue of 6.218 billion yuan, a year-on-year decrease of 9.48%, and realized net profit to mother of 0.113 billion yuan, a year-on-year decrease of 73.18%. 24Q2 achieved revenue of 2.397 billion yuan (-22.97% YoY) and loss of 0.212 billion yuan.

Incident comments

The mediocre performance of the 24Q2 movie market dragged down the company's main business, and the company's cinema market share was rising steadily. Mainly due to influencing factors such as a relatively insufficient number of leading films and weak performance of imported films, the 24Q2 film market failed to continue its recovery trend. The box office reached 7.42 billion yuan, down 28.7% year on year, and the number of movie viewers was 0.18 billion yuan, down 31.2% year on year. The company's main theatrical screening business revenue is highly correlated with the movie market, and costs and expenses are rigid. Affected by the lackluster performance of the box office, 24H1's profit fell sharply year on year. Among them, the screening-related business (movie viewing revenue, food and beverage sales revenue, advertising revenue) achieved revenue of 5.04 billion yuan, a year-on-year decline of 10.55%. From January to June 2024, the company's cinema market share was 16.9%, up 0.2 pct from the end of 2023. In the future, the company will continue to enhance service experience, optimize management efficiency, and continuously expand market share.

The company's film selection capacity continues to improve. All 24H1 investment films are profitable, and future film reserves are abundant. 1) The company's investment in films in the first half of 2024 was profitable, and the performance was outstanding. The films “Peace and Riot Force” and “I Don't Want to Be Your Friends” produced by the company won the May 1st and Dragon Boat Festival box office titles respectively, achieving box office grossing of 0.511 billion yuan and 203 million yuan. Participating films “Article 20” and “The Bears Came: Reversing Time and Space” were screened during the Spring Festival and achieved a double harvest of word of mouth at the box office. The company's main cast for the movie “Catch the Doll” set off the summer program, and the box office has already exceeded 3 billion yuan. Participating in the film “Murder Killing” grossed over 1.3 billion yuan at the box office. 2) The reserve is rich in movies. “Mistaken Killing 3,” “A Cloud Is Like You,” and “Deceive” to Like You, are expected to be screened within this year. In addition, “Tang Tan 1900,” “Change Your Mind Blossoms,” and “We Live in Nanjing” are all in production. The drama film “Determination to Run Away” has been scheduled for the Mid-Autumn Festival on September 15.

The company's interactive game business, which relies on mutual love, has performed brilliantly. After “Saint Seiya: Legend of Justice” was launched in Japan at the beginning of the year (the game was previously available in mainland China, Hong Kong and Taiwan, and Europe and the US), it became the top 3 best seller list on the App Store and the top 4 Google Play bestsellers, driving 24H1's game business to achieve revenue of 0.331 billion yuan, an increase of more than 100% over the previous year. At the same time, Mutual Love and Interaction adheres to the overseas distribution strategy. According to plans, games such as “Shadow Fight 3” and “Tianyuan Breakthrough” will be launched in the second half of the year.

Profit forecast: We expect the company to achieve net profit of 0.507 billion/0.939 billion yuan in 2024-2025, corresponding PE of 42/23X, respectively, to maintain a “buy” rating.

Risk warning

1. The recovery of film and television theaters falls short of the expected risk;

2. The film schedule falls short of the expected risk;

3. The box office performance of the work falls short of the expected risk.