[Research Report Summary]
The company continuously assessed some movie theaters with poor operating efficiency and initiated the closing process. A total of 17 domestic cinemas were shut down in the first half of the year, effectively improving the overall operating quality and operating efficiency of the company's cinemas.
The fixed increase was approved by the Securities Regulatory Commission, and the market share is expected to increase in the post-pandemic era. In April 2020, the company released a plan for the non-public offering of shares, which plans to raise 4.35 billion yuan, of which about 3.05 billion yuan will be used for new cinema projects. The company plans to build 162 cinemas in Beijing, Shanghai, Guangzhou and other cities from 2020 to 2022, with 1,258 screens, a total area of 791,000 square meters, and 176,000 seats. On August 10, 2020, the company's non-public offering of shares was approved by the Development and Review Committee of the Securities Regulatory Commission. We believe that in the post-pandemic era, companies are expected to use their scale advantages and capital advantages to achieve further expansion against the trend, and competitive barriers may be further strengthened.
The film and television industry is gradually recovering, and the company's performance is worth looking forward to. At this stage, cinemas have resumed work well. In the first week of the resumption of work, they received 109 million box office. The number of theaters that have resumed work, the number of screenings, and the number of movie viewers have all shown a trend of increasing daily. As the domestic epidemic stabilizes and the film industry recovers, restrictions on cinemas have gradually been relaxed. The company has also gradually and orderly promoted the opening of cinemas and film screenings, and launched a number of marketing activities for the resumption of business to promote the recovery of the film consumer market after the resumption of business. In the second half of 2020,WandaFilms such as “Octonauts Under the Sea”, “My Hometown and Me”, “Staying with You for a Long Time”, and “Celestial Arts”, etc. are expected to be screened at the appropriate time, and the company's subsequent performance recovery is worth looking forward to.
Profit forecasts and investment advice. The EPS for 2020-2022 is expected to be -0.52 yuan, 0.76 yuan, and 0.93 yuan respectively. We are optimistic that in the post-pandemic period, the company's competitive barriers will rise and its leading position will become more stable. Referring to the valuation of comparable companies, the company was valued 33 times in 2021. The corresponding stock price is 25.08 yuan/share, giving it a “buy” rating.
Risk warning: the risk of increased market competition, the risk of rapid expansion of the cinema business, the risk of repeated COVID-19, the risk of impairment of goodwill, the risk of loss of goodwill, the risk that the collaborative development of mergers and acquisitions targets falls short of expectations, and the risk that performance promises or falls short of expectations.