Main points of investment
Build a film and television production + distribution + streaming media platform, accelerate the growth of the number of members: Hengteng Network announced its annual results in 2020, annual revenue of 230 million (RMB, the same below), deducting non-home net profit of 12 million, the epidemic affects the company's network home building materials business performance. In terms of new business, the company announced the acquisition of Pumpkin Film and Ruyi Pictures in January 2021, focusing on film and television streaming, and expected to create a world-class subscription platform through Ruyi Pictures' top content production capacity. Pumpkin Film adopts an advertising-free subscription membership system, adding 2.51 million registered members in February, compared with + 192%, and 2.48 million paid subscribers in the same period, compared with + 170%. As of the end of February, Pumpkin Film APP had a total of 38.61 million registered members and 8.41 million paid members.
With production capacity as the core, it is sustainable and replicable. Ruyi Pictures, one of the top film and television companies in China, has produced TV dramas Nirvana in Fire, No War in Peiping, to our lost Youth, Sewing Machine Band, Hello, Li Huanying and many other high-quality film and television works; one of the management ideas of Ruyi is to take production ability as the core, to improve shooting efficiency and to reduce dependence on directors and actors. At the same time, it can optimize the company's production cost, quality, and sustainability. According to cat's eye data, as of April 1, 2021, "Hello, Li Huanying"
The cumulative box office is 5.38 billion, making it the second largest box office in China, providing a guarantee for the company's performance in 2021.
Evergrande Tencent resource integration helps business growth and scene development. The top two shareholders of the company are Evergrande Group and Tencent, with 45.55 per cent and 16.90 per cent respectively. From the perspective of ecological synergy of film and television business, Evergrande Property Services, Evergrande Studios, Evergrande Children's World and Evergrande have large potential audiences and commercial scenes, such as user and household diversion, studio production promotion, IP authorization of theme parks, etc.; Tencent Video and China Literature under Tencent also have industry-leading IP reserves and online traffic, which can carry out bilateral film and television licensing and IP multi-scene applications. We judge that the ecology of Evergrande and Tencent will accelerate the growth of revenue, copyright and membership of the film and television business.
Investment suggestion: we judge that the content production capability of Hengteng network and the subscription platform form coordination with the ecological resources of major shareholders, which will further promote the subscription membership platform. From the perspective of external coordination, Evergrande's cinema chain and theme parks are expected to boost the offline box office of the film and television business and the long-term space for IP realization. Investors are advised to pay attention.
Risk hint: the copyright and distribution of overseas films are limited, the competition of long video platforms intensifies, and the popularity of film and television content is not as hot as expected.