January 28th, HLBN (Hualu Baina) released its 2015 business result announcement, predicting a net profit of 255m RMB to 300m RMB, with a year-on-year growth of 71%-101%. In 2015, the company achieved a net profit of 29.74m RMB contributed byirregular items. Performance growth was mainly pushed by BlueFlame.
It is said that BlueFlame, which was acquired by the company, started consolidated financial statements and set an industrial layout with the core of media entertainment contents and multi-sector co-development. Depending on production, operational excellence, and innovative business mode, film & TV and variety business has become resources of core profits.
1. Sports industry: From sports marketing to business modes such as private IP and sports media, it built a leading sports marketing and event operating platform, and contributed to revenues in the reporting period. In 2015, the company signed an agreement with Hebei Province on operating snow project and set a layout of the Winter Olympics; it co-invested 500m RMB with its subsidiary BlueFlame to set up sports industry development limited company; and signed a formal agreement with China Football Industry Development Corp. on sponsor relationship of “Chinese Football Association Chinese Team”.
2. Film & TV: Within the reporting period, its main TV show revenues came from TV serious such asTaohuayun,Tiezaishao,The Gentle Crackdown, The Golden Age,My Dear Wife is after 80s; film revenue was fromDad’s holiday.
3. Variety show: Main revenue was from programs such asMuse Dress, Duets, The Exploration of the World; despite of this, the new programThe Greatest Love, which is produced by the invited golden variety production team Jin Rongxi, launched on prime-time HNTV on Saturday January 23rd2016. The debut rating was 1.36 nationwide.
4. Music: Poised, it tries VR and challenges the pain point of the industry. HLBN cooperated with Han Hong (famous Chinese singer) to establish Hualu Entertainment, focusing on the core of music and set a layout in areas such as idol cultivation, artist agency, O2O performing, and music variety. In 2015, the first product isI Am a Singertour. It planned a dozen of online and offline combined concerts. Using the newest VR technology, it will provide excellent music content to VR equipment.
As for investment, Huatai Securities advised:
It is predicted that 2015-2016 EPS will be 0.42 yuan, 0.57 yuan, with a year on year increase of 99% and 35%. The PE are 53X and 39X respectively.
In terms of variety show, the launch ofThe Greatest Lovewill continue to push the company profits. The adjustment of young and internet trend of TV serious has been noticed. In the aspect of sports, it invested on Oulan China and operated action validation sport strategy like La Liga on BJTV. With wide rang entertainment industry which focuses on music by Hualu Entertainment, the company has layouts towards all aspects on big entertainment direction.
Keep present overweight rating. Capital Securities concluded and advised：
In 2015, the company achieved net profits of 255m-300m yuan, with YOY increasing 71%-101%. It is below our forecast of 368m yuan, resulting in a performance below expectations.
The company actively promoted strategic restructuring and continued to work on variety show and sports. It is expected to become an important focus of future performance of the company growth. In addition, the company collaborated with Han Hong to set a layout of the music industry, acquiring 49% shares of Xinhua Guanglian to expand international channels. It also actively sets layout of wide range entertainment ecosystem.
It is expected that the 15-16 annual net profit might be 290m yuan (under 21.2%) and 379m yuan (under 16.2%), with YOY growth of 94.4% and 30.4%. EPS will be 0.54 yuan and 0.41 yuan per share, corresponding to shares 42 times EP in 2016.
Give a “buy in” investment recommendation. The target price is 27 yuan (50 times in 2016).
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