China Film (600977): Industry headwinds drag down performance growth Overall operations remain stable

China Film (600977): Industry headwinds drag down performance growth Overall operations remain stable

The first three quarters of 2019’s performance was slightly lower than we expected China Film to announce 1-3Q19 results: operating income 67.

27 ppm, a decrease of 2 per year.

8%; net profit attributable to mother 8.

74 trillion, down 32 a year.

7%, mainly due to the confirmation of the increase in holdings brought by China Film Barco in the same period last year.

5.4 billion investment income; net profit after deducting non-attribution 7.

US $ 8.3 billion, an annual increase of 2.

4%, slightly lower than our expectations.

Development trends The industry as a whole remains sluggish, dragging down revenue growth.

The company recorded revenue of 18 in 3Q19.

8.5 billion, down 18 a year.

1%.

We believe the industry downturn is the main reason for the decline in the company’s revenue.

The domestic box office in the third quarter of 19 was 166 overall.

580,000 yuan (including service fee), which decreases by 1 every year.

5%.

The box office contraction has put pressure on the company’s film distribution and screening revenue.

At the same time, the film and television production industry was affected by tightening regulations, downstream control prices, and other factors. The number of startup projects has dropped significantly many times, and the speed of cinema expansion has also improved.

We believe that the company’s film and television production and film and television equipment business revenue has therefore been dragged down.

In addition, the company consolidated its shadow barco in 3Q18. According to accounting standards, after the consolidation, the sales revenue of the company’s holding theaters was replaced internally.

We judge that 3Q19’s increase in the percentage of inbound sales in China may be one of the reasons for the decline in revenue.

Costs were properly controlled and overall operations remained sound.

Although the company’s 3Q19 revenue declined, operating costs were effectively controlled, and the 3Q19 gross margin fell by 0.

9ppt to 20.

2%.

In terms of expenses, the company’s sales, management and R & D expenses totaled 1 in the third quarter.

65 ppm, a decrease of 8 per year.

9%.

Benefiting from this, the company realized deduction of non-attributed net profit1 in 3Q19.

9.7 billion, an 四川耍耍网 annual increase of 23.

9%.

The company has the advantages of full industrial chain operation and scale advantages, and it will maintain stable operation during the industry adjustment period.

In the first three quarters of 2019, the company led or participated in the production of 15 movies, and gradually achieved a box office of 60.

3.7 billion, accounting for 22 of the domestic box office.

2%; during the same period, the box office market share of domestic / imported films that the company participated in distributing also reached 38 respectively.

8% and 58.

2%.

Looking forward to 2020, the company’s film and television film reserves are abundant, a total of 13 films and more than 30 TV series are steadily advancing.Among them, the company led or participated in the production of the film “Chinese Women’s Volleyball”, “Detective Chinatown 3”, “The Pioneer” is about to land in the 2020 Spring Festival file, the film performance is worth looking forward to.

Earnings Forecasts and Estimates Based on the above analysis, we lower our net profit for 2019/202014.

8% / 11.

8% to 11.

2.8 billion / 12.

1.8 billion.

The current contradiction corresponds to a 23x / 21x price-earnings ratio for 2019/2020.

We maintain our Outperform rating, but as a result of the downward revision of our earnings forecast, we have also cut our target price by 9.

4% to 16.

30 yuan, corresponding to 27 times / 25 times price-earnings ratio in 2019/2020, which is gradually 17 compared to the current one.

2% upside.

Risk regulatory policy adjustments; industry competition intensified; box office missed expectations.