Events:
According to the announcement in the third quarterly report, the company achieved operating income of 626 million in the first three quarters of 2017, up 10.03% from the same period last year; net profit from home was 229 million, up 45.73% from the same period last year; and earnings per share was 0.27, up 45.76% from the same period last year. At the same time, the announcement shows that the company's 2017 net profit is expected to change between 0 and 394 million, an increase of 303 million to 30 per cent year-on-year.
Core viewpoints
The revenue of the boutique drama confirmed to promote the high growth of performance, during which the expense rate decreased and the cost control effect was remarkable: the company's boutique drama business performed brilliantly in the first three quarters of the company. during the reporting period, the first and second parts of "that Starry Sky and that Sea" were successively broadcast on Hunan Satellite TV, and were simultaneously launched on Internet platforms such as iQIYI, Inc. and Sohu.com Ltd. "that Starry Sky and that Sea 2", which was broadcast on October 2 in Hunan Satellite TV Youth solo Theater, has nearly 500 million broadcasts so far, and has won the championship of viewers at the same time many times. The company's high-quality boutique drama production capacity has once again been verified by the market. During the reporting period, the company invested in the production and distribution of experienced Dongyang mandalas, and plans to raise no more than 1.2 billion yuan to invest in shooting 4 TV dramas and 5 online dramas. In the future, with the help of the strong production capacity of Fantasy Star Park, the rich issuing experience of Dongyang Mandala and the financial strength of the capital market, the listed companies are expected to continue to output high-quality head quality content by virtue of "strength + capital". Game business sector, IP is rich in resources, the first wave of subsidiaries focus on operating "Snow Eagle Lord" and "Mangmianji" two major IP, Fengyun interactive core to create ARPG games and expand the field of H5 games. The reduction of film and television advertising expenses in Neverland Star Park and the overall divestiture of the toy business last year have reduced the company's period expense rate to 10.60% from 15.2% before 2016 (including 1.99% for sales, 9.78% for management, and-1.17% for financial expenses).
The sale of thumb games brings performance flexibility, and stock bond financing promotes enhanced financing: during the reporting period, the company's sale of 30 per cent equity in thumb games has been approved by the CSRC. The equity transfer consideration is 227 million (90.83 million cash + 10.44 million Tianrun shares in three installments), and the investment premium is nearly 150 million (the equity cost of thumb games is 54 million, bringing cumulative equity changes of 25.65 million in 2014-2016). The book value of thumb games is 79.65 million). At present, the company is actively promoting financing through bonds, equity and other channels to promote the capital demand of TV series business and the layout of new business. In terms of bonds, at present, the asset-liability ratio of the company is only 7.02%, and the overall asset situation is good. The plan documents of the company's non-public issuance of no more than 900 million bonds have been reported to the Shenzhen Stock Exchange and feedback reply has been carried out. The promotion of bond financing is conducive to making full use of leverage. In terms of equity financing, the company's non-public stock offering plan has received a feedback notice reviewed by the CSRC and is currently cooperating with the feedback response work; this increase will greatly strengthen the company's production and output capacity of boutique dramas. In the field of industrial investment, the company has invested in Dongyang Mandala and is expected to strengthen the efficiency of capital use and the strategic layout of emerging business with the help of its business development and industrial investment experience in the field of pan-entertainment in the future.
During the reporting period, major shareholders and key management completed an increase in their holdings, demonstrating their confidence in the development of the company.
Profit forecast and valuation: assuming that the investment income brought by the transfer of thumb game equity is considered, the company is expected to achieve a net profit of 4.68,4.25 and 489 million from 2017 to 2019, with a corresponding EPS of 0.54,0.49,0.57 yuan per share respectively, and the PE of the previous stock price valuation is 16.2,17.9,15.54 respectively. There are many early callbacks, the current valuation is low, senior executives to increase holdings and market valuation switch background, to maintain a strongly recommended rating.
Risk hint: the game business advances slowly, the film and TV drama business falls short of expectations, and the goodwill risk.