Main points of investment
Event
We recently visited the management of the company in Zhangjiagang and exchanged views on the current situation and long-term plans of China News, Century Dragon, Tianyi Pictures (hereinafter referred to as "Tianyi") and wool textile business. The following is the main feedback of the survey.
Main points of investment
1H17 is the low point in the course of the long-term development of the century, and it is expected that the performance of 2H17 will improve: the long-term performance of 1H17 will not meet expectations mainly because some project negotiations have run aground due to industry competition and other reasons (higher bids from competitors), resulting in failure to advance as scheduled, and 2H17 is expected to improve significantly. It's mainly about movies.
The 49% stake acquisition of Tianyi Pictures continues to advance, and the completion of the acquisition is a high-probability event and an important growth engine for the follow-up: Tianyi mainly locates boutique TV series. We believe that Tianyi will become an important growth engine for the company in the next three years. Performance is expected to continue to release. Shooting of "Cao Cao" in 2018 is expected to take 6-8 months and 80 episodes, which is an important driving force for performance.
Continue to record investment returns: the company invests in the film and television industry through its Lugang Interconnection, and is expected to continue to record objective investment returns.
The woolen textile business is developing steadily and is expected to achieve an annual growth rate of 10%: there is no divestiture plan for the woolen textile business at present, because these businesses are relatively heavy on assets and can obtain sizeable low-interest loans for the company.
Investment suggestion
We expect the company's operating income in 2017, 2018 and 2019 to be 4.321 billion yuan, 5.12 billion yuan and 5.95 billion yuan respectively, and the net profit attributable to the parent company is 260 million yuan, 353 million yuan and 422 million yuan respectively, and the earnings per share are 0.29,0.39 yuan and 0.47 yuan respectively. The current stock price corresponds to 20.2x PE 14.9x 12.5x. We advise investors to pay attention.
Risk hint
The acquisition process of Tianyi Pictures was not as expected, and the competition in the film and television business intensified.