1H21 performance meets the forecast
The company announced 1H21 results: revenue of 391 million yuan, an increase of 555% over the same period last year; net profit of 14.14 million yuan, turning losses to profits over the same period last year, falling into the range of 1200 yuan to 18 million yuan in the previous forecast; deducting 11.12 million yuan of non-return net profit. Of this total, 2021 earned 378 million yuan, up 550% over the same period last year; the net profit returned to the mother was 30.61 million yuan, up 234% over the same period last year; and the net profit from non-return was 27.71 million yuan, an increase of 251% over the same period last year, and the performance was in line with market expectations.
Trend of development
Fewer 1H21 projects have been identified and revenues have not yet risen to pre-epidemic levels. 1) Film and Television: the company 1H21 has a total of "Mountain and River order" and "Storm Dance" (revenue is confirmed during broadcast in accordance with the new revenue criteria), the number of 2 episodes is 1 less than that of 1H20, and a total of 3 films have been released, including the online movie "Qilin Fantasy Town".
(the cumulative box office revenue is more than 10 million yuan), "I am the police's anti-mafia hero" and the cinema movie "crowds" (co-produced). We believe that the company's content production and revenue recognition may still be volatile in the short term. 2) other: the total 1H21 revenue of the company except film and television (including games, artist brokerage, advertising, etc.) is 18.52 million yuan, an increase of 231% over the same period last year. We believe that the competition in the game industry is intensified, the company's emerging business is still in the initial stage of development, and the related business needs to be developed continuously. The company said that it is in favor of technology to carry out mobile leisure game research and operation while deepening cooperation with operators in 5G business to promote video color ring back tone business commercial, short video operation projects.
Gross profit margin and net profit margin have yet to recover. The company's 1H21 gross profit margin is 15.5% 1H21 1H20 is 79.3% (mainly due to the lower operating cost of matching carry-over due to 1H20's confirmation that most of the income comes from the multi-round release of the stock series), but as the 1H21 confirms that the income items are still relatively small, the gross profit margin has not yet returned to 1H1919.1%. Benefiting from the improvement on the revenue side, the sales / management / financial expense rate of 1H21 is 1.7%, 5.3%, 2.7%, respectively, which is significantly lower than that of 1H20's 16.0%, 35.7%, 9.3%. The net interest rate is 3.6%, turning a loss into a profit compared with the same period last year, but there is still room for improvement compared with 10.3% of 1H19. The content of the reserve is relatively rich, pay attention to the progress of production and launch. By the time 1H21's film and television series "two conjectures of Marriage" and "Beacon Fire (killing Wolves)" and other four films have obtained a distribution license or online record number, the company expects to co-produce the documentary "1950 they are Young" will be released on Sept. 3; in addition, the company said that three films such as "War of the epidemic" have been completed, "Rat King" and "City of Liuguang" are in post-production, and three films such as "Zichuan" are being filmed. We believe that the company has the potential of high-quality content output and rich content reserves, so we suggest that we should pay attention to the production and launch of follow-up key projects.
Profit forecast and valuation
Considering that the confirmed progress of the project may fall short of expectations, we reduce the net profit in 2021 and 2022 by 33.1% to 1.13 / 151 million yuan. The current share price corresponds to a price-to-earnings ratio of 19.7 times 2021 / 2022. Maintain the neutral rating and cut the target price by 5.0% to 4.75 yuan due to the downgrade of earnings forecasts, corresponding to 15 times 2022 price-to-earnings ratio, which has 1.1% upside compared to the current stock price.
Risk.
Key projects are not advancing as expected; regulatory policy changes; and new business progress is not as expected.