Main points of investment:
The first quarter of 2018 reported high net profit growth, mainly contributed to the performance of the film and television business. In the first quarter of 2018, the company achieved revenue of 720 million yuan (+ 11.3%), net profit of 20.788 million yuan (+ 128.7%), and non-return net profit of 17.114 million yuan (+ 229.6%). The performance growth mainly comes from the sound development of the film and television business: the second release of the TV series "the good Life" and the co-production of the TV series "fall in love with you and heal me".
Continue to acquire 45% stake in Tianyi Film and Television in 2017, further strengthen the film and television business. In 2017, the company achieved revenue of 4.11 billion yuan (+ 14.6%), net profit of 290 million yuan (+ 64.1%), and non-return net profit of 260 million yuan (+ 53.3%). In November 2017, 395 million yuan in cash purchased 45% of Tianyi Film and Television's stock, with a total of 96%, with a commitment of 100 million yuan, 120 million yuan and 150 million yuan in 2017-2019. In the same month, 62.1 million yuan in cash bought 30% of Tangqiao sewage treatment company. a total of 60% of the shares are listed, with a commitment of 23 million yuan, 24.5 million yuan and 27 million yuan in 2017-2019.
The textile business is developing steadily, accounting for nearly 70% of the revenue. In 2017, the textile business achieved revenue of 2.83 billion yuan (+ 30.2%), mainly due to the increase in sales of semi-worsted and wool, but due to the rise in the price of raw materials, the overall gross profit margin of the textile business was 14.01%, down 2.44% from the same period last year. The company expects the textile sector to achieve sales revenue of 2.8 billion yuan in 2018, which is basically stable, with a profit of 80 million yuan to 90 million yuan.
Strengthen the film and television business, the largest profit contribution plate. The company's film and television business is realized through Century Dragon, Tianyi Film and Television, Lugang interconnection and foreign investment. The revenue of TV series business in 2017 was 830 million yuan (+ 40.3%), mainly due to the completion of follow-up acquisitions of Tianyi Film and Television; the revenue of film business was 78.446 million yuan, down 87.5% from the same period last year, mainly due to the participation of Century Dragon in films such as Guardian of the Century.
The net profit of Changlong in 2017 was 16.835 million yuan (with a committed performance of 80 million yuan), down 73 percent from the same period last year.
In 2018, Changlong will focus on doing a good job in the main theme TV series with CCTV and second-tier satellite TV as the sales target, participate in low-cost domestic films, increase the distribution of films, and strive to achieve a net profit of 60 million yuan. In 2017, Tianyi Film and Television achieved a net profit of 130 million yuan (100 million yuan promised), an increase of 111 percent over the same period last year, and completed the shooting and distribution of TV dramas such as "good Life", "Flowers blossom like Dreams" and "your name and my Last name". In 2018, Tianyi Film and Television will focus on developing boutique head dramas and participate in films such as behind-the-scenes players (Xu Zheng), striving to achieve a net profit of 120 million yuan. In 2017, Lugang Interconnection achieved a net profit of 5.94 million yuan, and the online drama "Moke Bank" was completed for post-production and release. In 2018, Lugang Interconnection will continue to focus on the development of online dramas such as "Toujin Fu" and strive to achieve a net profit of 50 million yuan. At the same time, the company participates in films such as "Operation Red Sea" (10%, has been released) and "a good show" (Huang Bo, August 10), which is expected to achieve a return on investment.
Profit forecast. We estimate that the fully diluted EPS of the company from 2018 to 2020 will be 0.4,0.52 and 0.65 yuan, respectively, and give the company a 20-fold valuation in 2018, corresponding to the target price of 8 yuan.
Risk hint: film and television project development is not up to expectations, century long long goodwill impairment risk.