Jinwu Financial News | According to BOC International Development Research Report, Reading Wen Group (00772)'s performance last year was in line with expectations, with revenue of 7 billion yuan in 2023, down 8% year on year. Adjusted net profit decreased 16% to $1.1 billion.
Looking ahead, the bank expects online business revenue to stabilize month-on-month, with a slight drop of 2% throughout the year, mainly considering the strength of core payment platforms and the gradual easing of the impact of channel contraction. Reading's core IP business is expected to maintain its growth trend, with a year-on-year increase of 22%, mainly due to an increase in the number of copyright licenses and a strong production project pipeline. Mobile games such as “Battle for the Sky”/“Dafeng Fight More People” have already received editions. In addition, Shinih expects to broadcast 6-7 series plus 2-3 movies, and Shinih's net profit for the full year 2024 is 560 million yuan.
The bank maintained revenue and adjusted net profit expectations for 2024, with reference to comparable high-quality content and copyright companies, and maintained a target price of HK$29 based on 20 times the 2024 price-earnings ratio. AI investment is manageable, dragging down profit growth in the short term, but in the long term, it brings room for imagination in production capacity expansion, cost optimization, and product innovation. Since February, the company's stock price has risen 30%. The bank believes that it has basically reflected the market's expectations for an increase in the number of authorizations and a strong project pipeline in 2024. The current price is 1.2 times PEG in 2024 (based on a compound profit growth rate of 16% in 2023-25), which is 1 times higher than the average of key content companies, and maintains a neutral rating.