Event: the company released its semi-annual report in 2023, with an operating income of 1.172 billion yuan, an increase of 40.69% over the same period last year; a net profit of 113 million yuan, a year-on-year turnround; and a net profit of about 74 million yuan, a year-on-year turnround.

The cinema screen is expanding steadily, and the box office share of the cinema directly operated by the cinema ranks first. By the end of June 2023, the company had 503 opened cinemas with 3154 screens, including 421 directly operated cinemas and 2686 screens. In the first half of 2023, 10 cinemas were opened, 68 new screens were added, and cinema screens expanded steadily. The company's box office revenue in the first half of 2023 was 1.001 billion yuan, an increase of 50.20% over the same period last year, of which the box office revenue of directly operated cinemas was 847 million yuan, an increase of 50.19% over the same period last year, with a market share of 3.65%.

Hengdian Pictures has a strong ability to invest in production and participate in the production of films with a high reputation at the box office. The film and television production and distribution revenue of 1H23 Company was 90 million yuan, an increase of 28% over the same period last year. Hengdian Pictures' films "Xiong Xin" and "unfamiliar Road of Life", which were produced by Hengdian Pictures in the first half of 2023, grossed 14.95 / 1.184 billion yuan (including service fee, the same below), respectively, being the third runner-up and May 1 champion of the Spring Festival. Co-produced films such as "wandering Earth 2" and "keeping you safe" have earned good box office and word of mouth. The reserves in the second half of the year include "worthwhile trip", "defiant 2", "burning winter" and so on.

The summer box office exceeded expectations, and the film market continued to repair, helping the company's projection business to further recover. According to Maoyan Professional Edition, since the beginning of this year, the film market has continued to repair, with a total box office of 8.72 billion yuan in July 23, the first in July of the previous year, and a cumulative box office of 34.98 billion yuan from January to July 23, an increase of 69.0% over the same period last year. Return to the 2019 box office level of 94.3% As of 7: 00 on August 18, the 23-year summer box office has reached 17.8 billion yuan, surpassing the same period of 19 years and reaching an all-time high. Under the supply of high-quality content, the demand for cinema is strong. Based on the current box office market repair rate, we expect the box office for the whole year to reach 57 billion yuan, returning to the 2019 level of around 90%, which is expected to lead to a strong repair of the company's screening business.

Profit forecast: we expect the company's annual return net profit in 23-24-25 to be RMB 230,317,000,000 respectively, a year-on-year turnround / + 38% debacle 30%, maintaining the "buy" rating.

Risk hints: repeated risk of epidemic situation; risk of expansion; less than expected at the box office; risk of changing demand for movies