Events:
Hengdian Film and TelevisionIn the release report: the total operating income of the company in the first half of 2020 was 98 million yuan, down 92.92% from the same period last year, and the net profit was-306 million yuan, down 276.9% from the same period last year. Due to the epidemic, all cinemas under the company were closed, no new cinemas, screens and no box office revenue, and the decline in revenue and profit in the first half of 2020 was also within the expected range.
Main points of investment:
In the first half of 2020, the company opened 459 cinemas (2833 screens), of which asset association and franchise accounted for 81.92% and 18.08% respectively. The main business income comes from film projection revenue, sales revenue and advertising revenue. Due to the epidemic in the first half of 2020, the company achieved a box office of 76 million yuan (down 93.82% from the same period last year), of which asset-linked cinemas accounted for 83.26% of the box office (3.04% of the market). On the industry side, China's total box office in the first half of 2020 was 2.246 billion yuan (down 92.8% from the same period last year), and the decline in box office revenue of the company was the same as that of the industry. In other words, if the box office growth rate of the industry picks up, the box office growth rate of the company is also expected to pick up.
In the first half of 2020, the company adjusted its business strategy to implement fine management, optimize cinema projects, improve quality, consolidate business foundation, reorganize existing cinemas and contracted projects in the first half of 2020, improve the overall quality of cinemas, control cash flow, comprehensively reduce costs and increase efficiency, and increase inventory removal to alleviate operating pressure. At the same time, the use of cinemas during the closure of cinemas to transform cinemas to increase features and theme halls to meet the needs of different users to enhance user viewing experience.
In the second half of 2020, the external epidemic situation was effectively controlled and the internal high-quality blockbusters provided the basic conditions for the growth of the box office in the second half of the year. The box office of "eight hundred" premiered on August 21 (it has earned 1.922 billion yuan by August 30, and the cinema will earn 922 million yuan, accounting for 52.27%). On the one hand, the box office of the blockbuster highlights that users' demand for good content and offline cinema remains the same. at the same time, the original Spring Festival film in 2020 has been rescheduled to 2020 National Day, such as "winning the championship", "Jiang Ziya", "me and my hometown" and so on. All are expected to boost the performance of the hospital line. After years of development, the company has the characteristics of a modern first-class chain service enterprise, a perfect operation standard system and a unified management strategy, and has formed a scale effect in the sinking market. Under the epidemic stress test, as a head asset-linked theater line, its anti-risk ability is better, and it also has the advantages of capital and capital to boost the market share of the main industry.
Profit forecast and investment rating: maintain buy rating. As the leading enterprise of the third and fourth tier cinema line, the company will still benefit from the box office increment of the third and fourth tier and the sinking market. In the short term, pessimistic expectations are gradually digested, and the demand for cinema after epidemic control is expected to pick up; in the medium to long term, if you look at the epidemic to accelerate market clearance, the head enterprises are expected to increase their market share with the help of capital operation. Due to the influence of the epidemic in 2020, the pressure on cinema operation has increased, which has further raised the threshold of cinema investment, reduced the investment confidence of small and medium-sized film investment companies, and accelerated the speed of market integration. We estimate that the return net profit of the company from 2020 to 2022 is 300 million yuan / 349 million yuan / 409 million yuan, corresponding to the latest PE of 47.8 times / 41 times / 35 times respectively. Affected by the epidemic, the cinema line has declined in the short-term industry in the first half of 2020 without changing the long-term development trend. The company relies on the advantages of Hengdian brand and capital reserves to superimpose high-quality films with fixed National Day files, and the national box office is expected to pick up in the second half of 2020. The company's cinemas, which are mainly asset-linked and box office revenue, have relatively good resilience, and then we maintain the company's buying rating.