Key points of investment
Incident: In 2023, the company's revenue was 2.8 billion yuan, down 28.33% year on year; net profit to mother was 450 million yuan, down 13.55% year on year. No dividends, no transfers. 2024Q1's revenue was 676 million yuan, up 0.93% year on year, and net profit to mother was 117 million yuan, down 25.73% year on year. Mainly due to the fact that Tencent's execution amount for a single large purchase contract decreased year by year according to the contract, last year's base figure had a high impact.
Expand related business based on copyright content management. The company proposed an “integrated two-wing” development strategy “with resource-based copyright business as the main body plus AIGC and innovative business as the two wings”. With “content copyright operation” as the core of the strategy: accumulating more than 100,000 hours of copyrighted content for movies, TV, animation, and programs. Develop large-scale integration of domestic film and television content copyright, introduce new media copyright for overseas movies, and integrate domestic and foreign high-quality content and IP commercialization operations. In 2023, the company continued to invest in short dramas, short dramas, movies and TV dramas. According to Lighthouse data, the film “Peace and Riot Force” in which the company participated is currently ranked in the top three pre-sales of the “May 1st” series.
Technological innovation drives technological transformation and empowers the company's copyright operation and digital content production business. AIGC field: The company released the creative engine ChatPV on March 15, 2024, which combines the Pangu Big Model with a self-developed vertical model in the video field. Promote the in-depth application of AIGC related technology in the fields of content creativity, film and TV drama content production, and short video creation. Innovative business: Develop innovative technologies such as AR/VR and the digital human metaverse to drive content production. Build a second growth curve around AI+ copyright and partner innovation business scenarios.
Investment advice: The company focuses on content copyright business and explores new growth poles in the industry in combination with AI-related technology. Film and television content operating platforms are showing diversified development, and the copyright value of short videos and related copyright is gradually becoming prominent. We adjusted our original 24/25 company forecast. The estimated net profit from 2024 to 2026 is 6/608/684 million yuan (previously forecasted net profit of 985/1,149 million yuan in 24/25), EPS was 0.23/0.23/0.26 yuan; PE was 22.8/22.5/20; maintaining the “buy-A” proposal.
Risk warning: AIGC's business development falls short of expectations, the risk of falling downstream demand for film and television copyright, etc.