3Q23 performance is slightly lower than we expected.
The company announced 1~3Q23 results: income 1.953 billion yuan, an increase of 59.4%; return to the mother net profit of 236 million yuan, year-on-year return to profit; deduction of non-return net profit 172 million yuan, year-on-year return to profit. Of this total, the 3Q22 income was 781 million yuan, an increase of 99%; the net profit of returning to the mother was 123 million yuan, turning losses into profits compared with the same period last year; deducting the net profit of 98.13 million yuan from the same period of last year, and the net profit of returning to the mother was slightly lower than we expected (148 million yuan). We judged that the revenue from film non-ticket and film and television production business was lower than expected.
Trend of development
The supply and demand of the summer film industry has improved significantly, and the company's market share is relatively stable. According to the company announcement, the total box office of domestic films from January to September 2023 was 45.572 billion yuan, an increase of 77.5 percent over the same period last year, with an orderly recovery, with the summer film industry box office and cinema attendance reaching an all-time high, boosting industry confidence. According to the company announcement, 3Q23 opened 8 new cinemas with 48 new screens, box office revenue of 638 million yuan, market share of 3.6%, 0.18ppt/ decreased by 0.14ppt compared with the same month, and joined the studio to achieve box office revenue of 97.01 million yuan and market share of 0.55%. Compared with the same / month ratio, 0.05ppt/ decreased and increased 0.05ppt, respectively, and the company's market share was relatively stable. We judge that the obvious rebound in the box office of the industry also promotes the improvement of the company's box office revenue compared with the same period last year, while the company itself is more sound on the basis of paying attention to efficiency.
The gross profit margin is improved compared with the previous month, and the operating expenses are relatively controlled. The company's 3Q23 gross profit margin is 18%, which is significantly improved compared with the previous month. On the basis of relatively rigid operating costs, the recovery of box office revenue leads to the leverage effect. While the company's 3Q23 sales and management expense rates remain low, at 0.7% and 2.3% respectively, we believe that the company will promote the strategy of reducing costs and efficiency and saving operating expenses or continue to maintain.
Continue to build content capacity and pay attention to the box office performance of reserve films. 3Q23 participated in the release of films such as "Hot", "missing each other" and "burning Winter". So far, the film "volunteers: heroic attack" and "ex 4: early Marriage" co-produced by 4Q23 has also been released. The company also incubates independent original TV dramas, online dramas and online movies, actively develops the investment business of account-sharing online dramas and online films based on iQIYI, Inc. 's "Youth Entrepreneurship Project", and builds the ability and channels for the promotion of film and TV drama projects. Looking forward to the follow-up, the films to be released include "Save the suspect" (November 11), "Wade across the Sea of anger" (November 25), "defiant 2" and so on. We believe that the company will speed up the development of the content plate, and the in-depth layout of the internal plate is expected to gradually contribute to the performance increment.
Profit forecast and valuation
Taking into account the lower-than-expected revenue of non-ticket and film and television production and the uncertainty of future content performance, we reduce the revenue of 2023 Universe by 4.7% in 2024 to RMB 2.658, but the cost continues to be effectively controlled, and we keep the net profit forecast of 2023 in 2024 unchanged. The current price corresponds to 21.4 times 21.4 times the current price of 21.4 times of 2023 pound E in 2024. To maintain the neutral rating, due to the downward shift of the valuation center of the industry, we lowered our target price by 8.7% to 15.8 yuan, corresponding to 30pm 24 times 2023mer 2024 Pamp E, which has 13.8% upside space compared to the current price.
Risk
The release rhythm of the content is uncertain, and the competition in the cinema industry intensifies.