Huayi Brothers achieved revenue of 1,107 billion yuan in 20Q1-Q3, a year-on-year decrease of 31.51%, net profit of the mother - 326 million yuan, an increase of 50.03% over the previous year, and net profit of the mother after deduction - 170 million yuan, an increase of 67.37% over the previous year.

Among them, Q3's single-quarter revenue was 783 million yuan, an increase of 45.02% over the previous year, net profit of the mother - 94,563 million yuan, an increase of 65.35% over the previous year, net profit of the mother after deduction of 64,019,500 yuan, an increase of 148.12% over the previous quarter; Q3 revenue and net profit after deducting non-profit increased, and overall losses narrowed in the first three quarters.

The loss in net profit for a single quarter in Q3 was mainly due to the disposal of shares in Brothers International LLC confirming non-recurring investment losses of 175 million yuan. In terms of cash flow, net operating cash flow for the single quarter of 20Q3 was 280 million yuan.

In terms of revenue by business, the revenue of the 20Q1-Q3 film and television entertainment sector was 995 million yuan, a year-on-year decrease of 36%, of which 20Q3 had revenue of 7.2 billion yuan in a single quarter. The revenue of the 20Q1-Q3 brand licensing and live entertainment sector was 54.46 million yuan, an increase of 49% over the previous year. Among them, 20Q3 had revenue of 44.53 million yuan in a single quarter, which had recovered from 9.93 million yuan in the first half of 2020. The company's reality projects in Haikou, Changsha, Suzhou, and Zhengzhou resumed opening one after another at the end of the first quarter. The revenue of the 20Q1-Q3 Internet entertainment sector was 5.07 million yuan, an increase of 118% over the previous year, of which 20Q3 had revenue of 15.21 million yuan in a single quarter.

Continue to implement the new “film and television plus reality” business model, accelerate the return to the fast track of healthy development, and have abundant reserves for subsequent film and television projects. In terms of the film business, “A Warm Hug” directed by Chang Yuan is expected to be screened within 20 years. The movie “Waitress” (formerly “Onmyoji”) based on the phenomenal mobile game is scheduled for the 2021 Spring Festival. The new film “749 Games” directed by Lu Chuan, “Sunshine Is Not a Robber” directed by Li Yu, “The Mermaid 2” directed by Jia Zhangke, and “Wandering Through the Sea of Wrath” directed by Cao Baoping have all gone into post-production Stage; many other films are being prepared, including “Railway Team”, “Future of the Future”, “China Test Pilot” Entering the preparatory stage, it is expected to launch from the fourth quarter to the first quarter of next year. The company is deeply involved in investment and production, and the blockbuster Hollywood sci-fi disaster “Moonfall (Moonfall)” (tentative name), directed by famous Hollywood director Roland Emmerich, was launched in 2020. Investment advice: We are optimistic that Huayi will usher in a double inflection point at the industry and company's operation level. At the industry level, with films being screened one after another, the film industry is recovering at an accelerated pace. At the same time, small and medium-sized enterprises will speed up their recovery in the middle of the industry's cold winter. At the same time, small and medium-sized enterprises will clear up quickly in the middle of the industry's cold winter, and once the company passes financing strategies or other strategies or other financing strategies or other strategies are passed dilemmas, competitive advantages and Market share is expected to increase. At the company level, the outstanding performance of Huayi Brothers' “Babai” has initially verified the restoration of advantages in the main business, and attention is being paid to the pace of subsequent film finalization. Considering the Q3 performance, we lowered the company's net profit for 20 years to -299 million yuan (original value of 107 million yuan). The estimated net profit for 21-22 was 464 million yuan and 595 million yuan respectively. Corresponding to PE in 21-22 was 26.9x and 21.0x respectively, maintaining the purchase rating.

Risk warning: The impact of the epidemic; the production schedule of film and television projects was delayed, and the movie box office fell short of expectations; the operating results of reality entertainment projects did not meet expectations, and the progress of new project expansion was uncertain; brain drain and management risks; policy supervision risks. Operating cash flow risk, risk of financing progress falling short of expectations.