标题：Huayi BrothersMixed results – strong revenue but disappointing earnings; maintain Hold
发布日期：2016-03-25 15:41:20
内容： 2015 core earnings fell 10% yoy to RMB574m; maintaining Hold Huayi Brothers has reported 2015 results. We maintain our Hold rating with anew target price of RMB35 (from RMB40). Reported net profit rose 9% yoy toRMB976m, on investment gains from Ourpalm, Guru Online and YaolaiTheatre. Excluding non-recurring items, core net profit declined 10% yoy toRMB574m on a margin contraction on unfavorable product mix change andhigher finance costs. We remain cautious on the name given the extreme highuncertainty in the return of upstream movie production, especially after anearnings decline in 2015 despite strong performance of its core business. Strong core business drove revenue growth Revenue increased 62% yoy to RMB3.9bn, driven by a 136% yoy increase inthe entertainment business to RMB2.8bn. We believe this could be attributableto the strong box office of movies including “Mojin – The Lost Legend”,“Dragon Blade” and “Mr. Six”, and the consolidation of Dongyang Haohan andDongyang Meila. Revenue from brand licensing declined 76% yoy to RMB56m,due to the high base in 2015. Internet gaming grew 11% yoy to RMB861m. Unfavorable product mix change led to margin contraction and earnings decline EBIT margin declined 13ppts yoy to 24% in 2015, due mainly to an unfavorablechange in product mix – revenue contribution from high-margin businesssegments (i.e. brand licensing and internet gaming) decreased from 43% to23%. EBIT contraction coupled with increasing finance cost (up 44% yoy) ledto a 10% yoy decline in core net profit. Lowering earnings estimates by 11%/12% in 2016/17 We adjust down our EPS estimates by 11% to RMB0.71 in 2016 and by 12% toRMB0.89 in 2017. Despite production pipeline, we revise down our brandlicensing estimates, given the uncertainty in gaining new projects. Valuation and risks We derive our new target price of RMB35 on DCF-based valuation (8.5%WACC and 4% terminal growth rate, unchanged). Downside risks includelower-than-expected return from films, and production delay. Upside risksinclude better-than-expected box-office performance.
发布日期：2016-03-25 15:41:20
内容： 2015 core earnings fell 10% yoy to RMB574m; maintaining Hold Huayi Brothers has reported 2015 results. We maintain our Hold rating with anew target price of RMB35 (from RMB40). Reported net profit rose 9% yoy toRMB976m, on investment gains from Ourpalm, Guru Online and YaolaiTheatre. Excluding non-recurring items, core net profit declined 10% yoy toRMB574m on a margin contraction on unfavorable product mix change andhigher finance costs. We remain cautious on the name given the extreme highuncertainty in the return of upstream movie production, especially after anearnings decline in 2015 despite strong performance of its core business. Strong core business drove revenue growth Revenue increased 62% yoy to RMB3.9bn, driven by a 136% yoy increase inthe entertainment business to RMB2.8bn. We believe this could be attributableto the strong box office of movies including “Mojin – The Lost Legend”,“Dragon Blade” and “Mr. Six”, and the consolidation of Dongyang Haohan andDongyang Meila. Revenue from brand licensing declined 76% yoy to RMB56m,due to the high base in 2015. Internet gaming grew 11% yoy to RMB861m. Unfavorable product mix change led to margin contraction and earnings decline EBIT margin declined 13ppts yoy to 24% in 2015, due mainly to an unfavorablechange in product mix – revenue contribution from high-margin businesssegments (i.e. brand licensing and internet gaming) decreased from 43% to23%. EBIT contraction coupled with increasing finance cost (up 44% yoy) ledto a 10% yoy decline in core net profit. Lowering earnings estimates by 11%/12% in 2016/17 We adjust down our EPS estimates by 11% to RMB0.71 in 2016 and by 12% toRMB0.89 in 2017. Despite production pipeline, we revise down our brandlicensing estimates, given the uncertainty in gaining new projects. Valuation and risks We derive our new target price of RMB35 on DCF-based valuation (8.5%WACC and 4% terminal growth rate, unchanged). Downside risks includelower-than-expected return from films, and production delay. Upside risksinclude better-than-expected box-office performance.
