Hengdian Film and Television (603103) 2018 Annual Report Review: Expansion Performance Temporarily Pressures Low-line Market Share to Increase and Momentum Does Not Change
Core point of view The company’s projection business is still in the expansion phase in 2018, and the rapid rise in costs has dragged down the current performance.
In the medium and long term, the company’s market share in low-tier areas will continue to increase, and the sales business will generally improve.
As the company’s theater matures and its brand influence expands, we are still optimistic about the company’s potential to grow into a theater line leader and maintain the company’s “overweight” rating.
The cost of 广州桑拿 projection business has put pressure on performance and the company’s net profit ranks.
The company achieved operating income of 27 in 2018.
24 ppm (decade +8.
2%), of which box office income was 24.
610,000 yuan (ten years + 8).
3%), non-ticket income 6.
9% (one year + 18%), non-ticket income accounted for 25% (in the past +2 pcts); net profit attributable to mothers3.
At 21 ppm (previously -3%), the primary reason for net profit substitution was the rapid rise in the cost of the film projection business, which reached 20.
77 ppm (previously + 13%), resulting in a gross profit margin of -2% for the segment that year.
Considering that the company’s sales and financial expenses have declined on average and the internal control level has improved, we are still optimistic about the profitability of the company’s theaters after maturity.
Screening business: The national layout is accelerating, and the market share in low-line areas is expected to be stable and progressive.
The company opened 52 new theaters in 2018, and opened 7/4/14/15/10/2 in North China / Northeast China / East China / South Central China / Southwest China / Northwest China respectively.
The company has 316 affiliated asset-linked theaters, with a total box office of 21 trillion yuan (+ 6%) and a market share of 3.
5% (one year-0.
3pct), the third-largest film cast since 2016.
According to data from Cat’s Eye Professional Edition, 59% of Hengdian’s box office came from third-tier and below, with a low-tier market share of 5.
6%, the only low-end market share among the top three major cinemas, whose market share is still increasing, and the gap between the second place and the Dadi Cinema has narrowed to US $ 200 million.
With the end of the theater incubation period, the company’s market share in low-line areas is expected to continue to increase.
Non-ticketing: Online ticketing has impacted the sales business, and the advertising business has grown.
Online ticketing has reduced consumers’ time spent in the theater lobby, and the company’s merchandising business revenue in 2018 was 2.
500 million US dollars, basically the same as last year; against the background of increased investment promotion and rising media resources, advertising revenue reached 200 million euros (+ 27% growth).
With the further release of consumption potential in low-line areas and the expansion of the company’s brand influence, we are optimistic about the long-term value of the company’s non-ticketing.
Risk factors: decrease in viewing expenses, loss of low-level audiences, excessive expansion slowing current performance, and excessive gross margin shift.
Investment suggestion: Considering that the company is still in a period of rapid expansion and new cinemas are still to be cultivated, we lower the company’s net profit forecast for 2019/20 to 3.
0 ppm (was 5).
9 ‰), the corresponding EPS prediction is 0.
89 yuan (previous forecast was 1.)
53 yuan), the net profit attributable to mothers is forecast to be 4 in 2021.
60,000 yuan, corresponding to EPS1.
Considering that the company’s market share in the low-tier areas has not improved, the brand’s influence has increased, and the company’s non-ticket business has been improving for a long time, we maintain the company’s “overweight” rating.