Incidents:
1. On January 31, Wanda Film released its 2023 annual results forecast, with net profit of 9-1.2 billion yuan, deducting non-vested net profit of 700-10 billion yuan, and basic earnings per share of 0.4130 yuan/share - 0.5506 yuan/share. From January to December 2023, the company's domestic cinemas achieved box office of 7.56 billion yuan (excluding service fees), returning to 96.4% in 2019; the number of moviegoers was 186 million, recovering to 92.7% in 2019, with a cumulative market share of 16.7%. Among them, the market share of direct-run cinemas increased by 2 percentage points over 2019, and single-screen output was 1.85 times the national average. Meanwhile, the company's Australian Cinema Line achieved box office revenue of about 1,401 billion yuan in 2023, an increase of 13% over the previous year. As of December 31, 2023, the company has 905 theaters and 7,546 screens that have been opened in China, including 709 direct-run cinemas, 6,156 screens, 196 asset-light cinemas, and 1,390 screens; the company's Australian cinema line has 61 cinemas with 529 screens.
2. On January 29, Wanda Film issued the “Notice of Resolutions of the 15th Meeting of the 6th Board of Directors”, announcing that after review, the board of directors agreed to elect Ms. Chen Xi as the chairman of the sixth board of directors of the company. The term of office will begin on the date of review and approval by the board of directors until the end of the term of the sixth board of directors. At the same time, after approval of the Board's nomination committee's qualifications, the board of directors agreed to appoint Ms. Chen Xi as the company's president for a term of office beginning on the date of review and approval by the board of directors until the end of the term of the sixth board of directors.
In the attachment to the announcement, Ms. Chen Xi's resume is as follows: Born in 1982, Chinese nationality, graduated from the Central Academy of Drama with a bachelor's degree in acting, and an EMBA in finance from Tsinghua University's Wudaokou School of Finance.
He founded Film Art Connect Media in 2012, and has been the president of Shanghai Ruyi Film and Television Production Co., Ltd. and the executive director of China Ruyi Holdings Co., Ltd. since 2015.
Senior producers are at the helm, and the company's film and television content business is expected to show a new atmosphere. In 2023, the company's main control film “The Three Teams” had a total box office of about 700 million yuan and participated in the production of many theatrical movies. The content business is expected to be strengthened in 2024. According to an announcement from Hong Kong stock listed company China Ruyi, Ms. Chen Xi resigned as an executive director on January 12, 2024 due to other business responsibilities. Ms. Chen Xi (Chen Zhixi) is a professional with outstanding achievements in the domestic film industry in recent years. Her projects include “Hello, Li Huanying” (2021, box office of 5.413 billion), “Keep You Safe” (2023, box office of 700 million), and “Enthusiasm” (2023, 913 million). As a producer, she has participated in film projects such as “People are in trouble” (2012, box office 1.27 billion), “Pancake” (2015, box office 1.16 billion), and “Tang Ren) “Street Detective” (2015) (Year, box office: 823 million), etc., and films produced include “Give You a Little Red Flower” (2020, box office: 1,432 billion) and “Walking Alone on the Moon” (2022, 3.103 billion). Ms. Chen Xi's hit “The Annual Meeting Can't Be Stopped!” on the 2024 New Year's Day schedule He is a co-producer and is the general planner for “Life at Speed 2,” which is about to be screened during the Spring Festival.
Cinema leaders have been supported by stable upstream resources, and strong forces have joined forces to welcome the spring breeze in the industry. On January 13, Beijing Hengrun transferred 29.8% of its shares in Wanda Investment to Ruyi Investment and completed the industrial and commercial change registration procedure on January 12, 2024. According to the equity transfer agreement of December 12, 2023, Ruyi Investment will eventually hold a total of 51% of the shares of Wanda Investment, the controlling shareholder of the company, and the actual controller of the company will be changed to Mr. Ke Liming, the wholly-owned controlling shareholder of Ruyi Investment. Mr. Ke Liming indirectly holds 34.84% of China's Ruyi shares, while Tencent Holdings indirectly holds 23.80% of China's Ruyi shares. China's Ruyi had a total revenue of 804 million yuan in the first half of 2023. Its main business includes film and TV drama production, online streaming, and game business. Among them, the film and TV drama brand Ruyi Pictures participated in the production and distribution of films totaling 5.462 billion yuan in the first half of 2023. The films that were mainly controlled last year included “Exchanging Your Life,” “Keep You Safe,” and “Enthusiasm.” Projects scheduled to participate in 2024 include the Spring Festival film “Flying Through Life 2,” “Article 20,” “When Bears Go Back in Time and Space”, “Hot and Rolling Hot”, and the Tanabata festival “White Snake: Floating”. In addition, China's Ruyi also has streaming pumpkin movies.
Investment advice: As a leading cinema company, the company is expected to benefit from a steady recovery brought about by the positive cycle of supply and demand in the film industry. At the same time, with the gradual stabilization of shareholders and management, the company's high-quality cinema assets are supported by upstream content resources, and valuation is expected to increase. We expect the company's revenue in 2023-2025 to be 135.81/150.35/16.070 billion yuan, up 40.1%/10.7%/6.9% year on year, and net profit to mother will be 11.76/16.69/ 1.772 billion yuan respectively, reversing/up 42.0% /6.1% year on year, corresponding PE 21/15/14 times, maintaining a “buy” rating.
Risk warning: The recovery of the consumer market falls short of expectations, the launch of content projects falls short of expectations, and the increase in market share falls short of expectations.