Incident: The company disclosed the 23 annual report & 2014 quarterly report: 1) 23 year revenue of 1,926 million yuan/year over year, net profit to mother - 110 million yuan/year over year -130.2%, net profit after deducting the impact of investment income and impairment losses resulting from holding long-term equity investments in Huafang Group, net profit to mother was 829 million yuan; 2) Net profit for the 23Q4 single quarter was 309 million yuan/year on year +343.0%, net profit to mother 100 million yuan, net profit not attributable to mother- $8.64 billion. 3) 24Q1 revenue of 560 million yuan/year on year +138.7%, net profit due to mother of 255 million yuan/year on year +317.3%, net profit of 249 million yuan/year on year after deduction of net profit of non-return mother +349.1%.
In '23, the company's scenic spots were opened one after another to help restore the main performing arts industry.
① In terms of number of performances: Under comparable standards, the number of performances in the Hangzhou/Sanya/Lijiang/Guilin project in '23 was 89%/73%/105%/91%, respectively, compared to '19, and the overall recovery rate for assets/heavy asset projects was 117%/119%, respectively.
② In terms of revenue: The Hangzhai/Sanya/Lijiang/Guilin projects achieved revenue of 6.55/ 1.92/3.22/ 190 million yuan respectively. Compared with 2019 recovery rates of 71%/49%/97%/118%, respectively, the Jiuzhai/Zhangjiajie/Xi'an/Shanghai projects achieved revenue of 0.89/0.69/0.52/0.98 billion yuan respectively.
③ Profit side: The net profit of the Sanya/Lijiang/Guilin project was 1.11/1.95/0.69 billion yuan respectively, with a recovery rate of 50%/94%/202% compared to 2019, with net interest rates of 57%/61%/36%, respectively, +1.6pct/-1.4pct/+15.0pct compared to 2019; the net profit of Jiuzhai/Zhangjiajie was 0.50/0.1 billion yuan respectively, with net interest rates of 57%/15%; Xi'an/Shanghai projects lost 0.38 million yuan and 61 million yuan respectively.
④ Asset-light business: Confirmed revenue of 85 million yuan, of which about 66 million yuan was confirmed by the subsidiary Sanya Songcheng Infinity Technology. The income tax rate was 15%, corresponding to a net interest rate of 81%.
Mature projects are revitalized, showing potential for exploration. The Hangzhou Project 23 May 1 performed 18 shows in a single day for 2 consecutive days, setting a new record of 21 shows per day during the summer. The number of performances in a single day for the Lijiang and Guilin projects also reached record highs. The market share continued to increase, and the group distribution ratio was continuously optimized.
The training project climbed the hill quickly and gained a firm foothold and increased its share. ① The market feedback was good after the revision of the Xi'an project. There were 8 shows for multiple days on the 23rd National Day, and 10 shows every day for 5 consecutive days during the Spring Festival in '24, reflecting the flexibility and success rate of the Songcheng project. Furthermore, based on the number bottleneck, the Xi'an project plans to open Theater No. 2 during the summer. We believe that the logic of adding additional theaters to raise the ceiling is also expected to be verified in projects such as Lijiang, Guilin, and Foshan. ② The Foshan project officially opened on the first day of the new year. There were 65 performances during the Spring Festival, and 9 shows in a single day for multiple days, breaking the record for the number of performances in a single day for the newly opened project. In addition, the Foshan project will innovatively launch the live performance “Oh! “Pearl River” breaks away from the framework of ancient times, explores young customers, and is expected to be promoted to other parks in the future.
The reservations were removed, and the focus was on the main business after the depreciation. Affected by factors such as the external environment and the decline in the prosperity of the live streaming industry, the company calculated an impairment loss of 861 million yuan in long-term equity investment for Huafang Group, which holds 35.35% of the shares. The future will focus on the main entertainment business, and the factors that suppress stock prices have been effectively mitigated. Furthermore, due to reservations issued on the 22nd annual report, some institutions were unable to allocate them. The non-standard items in the annual report were eliminated, and the company is expected to receive incremental capital attention.
24Q1 results are in line with expectations. ① On the revenue side, 24Q1 achieved revenue of 560 million yuan, a recovery rate of 68% compared to 2019 (revenue from January to April '19 included the Internet performing arts business), 2,181 performances in 24Q1, and 1935 asset-heavy shows, and a recovery rate of 157%/173%, respectively. ② On the gross profit side, 24Q1 gross profit margin was 68.75%, compared to 19Q1 -1.02pct, or due to low gross margin of nurturing projects. ③ On the cost side, the sales rate/management rate/R&D rate/finance rate were 4.74%/7.92%/1.34%/-0.29%, respectively. Compared with 19Q1, -2.96pct/+2.82pct/-0.87pct/-0.26pct, the company continued to promote cost reduction and efficiency, and overall expenses improved. ④ On the profit side, net profit to mother was 255 million yuan, and net profit margin was 44.98% /0.09pct compared to 19q1+0.09pct.
Profit forecast and investment suggestions: Songcheng's mature projects have been revised and upgraded to raise the ceiling, cultivate projects to climb rapidly, and promote offsite expansion. The company's fundamentals and long-term growth are still steady. We are optimistic about the company's future performance flexibility and growth space. In addition, the company reduced the value of the house plan and firmly focused on the main performing arts business; it also issued an equity incentive plan in '23 to ease the market's concerns about management. We estimate that the company's net profit for 24-26 years was 12.8/15.1/1.66 billion yuan, respectively. The current market value corresponds to PE of 21/18/16 times, maintaining the “gain” rating for the company.
Risk factors: Macroeconomic recovery falls short of expectations, market competition intensifies, and new projects fall short of expectations.