[Market view]
Last week, the media (Shenwan) index fell 3.89% as a whole, and the CSI 300 index fell 2.08% as a whole over the same period. The sector underperformed the CSI 300 index by 1.81%, ranking 22nd among all sectors. We believe that the opportunities for the media sector in 2024 will focus on the changes of AI industry and individual stocks; In the short term, it is suggested to focus on publishing, AI video+film summer archives, and underestimate the performance of the board (games, publishing).
In Hong Kong stocks, the Hang Seng Technology Index fell 7.61% last week. We believe that with the improvement of fundamentals, cash flow and dividend distribution, Hang Seng Technology is still worth deploying, focusing on the basic improvement of individual stocks. We suggest focusing on Tencent, Meituan, Fasthand, Bilibili, NetEase, etc; At the same time, it is suggested to focus on Xinhua Wenxuan and higher education sectors.
[Thinking this week]
Hong Kong shares: benefited from the catalysis of policies (such as the real estate policy, the rise of potential optimization expectations for Hong Kong shares' dividend and profit tax, and the five measures for cooperation with Hong Kong previously issued by the CSRC), the market's attention to the Hong Kong stock market, especially the dividend direction, has increased. In addition, Hang Seng Science and Technology started "high-quality development". In 23 years, the profits and free cash flow of leading enterprises have improved significantly, while the superimposed dividend ratio has increased. It is suggested to actively focus on Hong Kong stock dividends and growth opportunities.
AI: The big model price war started, and we are optimistic about the improvement of the application profile. Recently, many big model manufacturers have officially announced that the call price has dropped, including Zhipu, Byte Beat, Alibaba, Baidu, Tencent and iFLYTEK. We believe that the price reduction trend of AI underlying model is a key stage in AI competition, which is expected to continue in the short and medium term. From the perspective of the big model, we believe that the big model competition will continue from the ability index to the cost competition, and the competition will further intensify. Exploring the commercialization balance of AI models and technology catch-up will continue to be the main theme of domestic big models. From the perspective of downstream applications, we believe that the price war of big model manufacturers benefits the reduction of application development costs, and we are optimistic about the AI application developer ecology, the prosperity of AI applications in the whole track and the accelerated landing of products; In addition, it is suggested to focus on the progress of domestic AI video models in the near future.
[Investment Proposal]
State owned publishing: it can attack and stick to the high-quality direction, and it is suggested to actively focus on new formats such as after-school service/research. We believe that the impact of income tax on performance has gone through a round of digestion, and we are more optimistic about the performance of subsequent sectors. It is suggested to focus on two major directions: 1) The new business layout should be positive, and Southern Media should be recommended. It is suggested to focus on Chinese Media and Shandong Publishing (the research and study layout should be positive, and Xinhua Culture and Tourism Group achieved a revenue of 99 million yuan in 23H1, which is the best level in the same period in history; in addition, 23H1 Company acquired Shandong Hongye Travel Agency to arrange adult medium and high-end travel), Wanxin Media, etc; 2) In the direction of high dividends, it is suggested to focus on Zhongnan Media, Phoenix Media, Changjiang Media, Shandong Publishing, Xinhua Wenxuan, etc.
AI: The trend of technology industrialization continues to rise, and the expectation of GPT multimodal update and AI application landing in multiple directions is strong. AI and education are naturally adapted, and multi round dialogue, multi language understanding and other abilities are easy to implement without special training and debugging; In addition, the education industry has a large market space, strong willingness of parents to pay, and clear business scenarios. It is recommended to focus on Southern Media (with both channel logic and product logic) and focus on Wanxin Media, Jiafa Education, Century Tianhong, New Oriental, TAL, etc.
Film and television theaters: long videos are frequently popular, and the Dragon Boat Festival&Summer Festival films are gradually developed. Many key films are waiting to be shown, and the industry boom is expected to rise driven by both supply and demand. In addition, AI+video continues to catalyze, and film and television is also an obvious direction to benefit. Mango hypermedia is recommended (Singer's popularity continues to rise, and variety show Q2 has entered a new round of scheduling cycle. Sister's hit is expected, and Village Flower is expected to be rebroadcast. In addition, the company reserves key dramas such as National Beauty and Water Dragon Singing, which may have breakthrough this year). It is suggested to pay attention to 1) the leading roles of cinemas and online ticketing: Cat's Eye Entertainment, Wanda Movie (I Don't Want to Be Friends with You, Dragon Boat Festival, White Snake: A Floating Life, summer vacation), Hengdian Film, Shanghai Film, etc; 2) High quality film content producers: Light Media (Anti Mafia is scheduled for the Dragon Boat Festival, and Nezha 2 is expected to be launched within the year), Bona Pictures (Legend is scheduled for the summer), Chinese films, and hundreds of thousands of talents.
Hong Kong stock/Internet: [dividend direction] It is suggested to focus on Tencent (steady operation+increased free cash flow of equity, and 100 billion repurchase significantly improved returns) and Xinhua Wenxuan (dividend rate TTM-6.6%, less affected by income tax than peers, and stable dividend distribution), whose investors' returns are stable. At the same time, it is suggested to pay attention to the dividend attribute of the Hong Kong stock higher education sector, waiting for policy improvement space, the current undervalued+high dividend, and it is suggested to pay attention to China Education Holdings, China Science and Technology Training, China Chunlai, etc; In addition, it is suggested to pay attention to Chinese Oriental education. [Growth direction] It is suggested to focus on marginal stocks with positive potential, such as Bilibili (SLG new product Sanmou is coming online soon, it is suggested to focus on H2 game income elasticity, with short-term event catalysis), Meituan, Fasthand - W. In addition, it is suggested to pay attention to Meitu (AI picture track), Tencent Music, Yuewen, Ctrip, Maoyan, etc.
Focus Media: A large proportion of dividends are distributed, and the current dividend yield is about 5%. The dividend at the end of the year was 4.76 billion yuan, corresponding to a dividend ratio of 99% of the net profit attributable to the parent company and a dividend ratio of about 5% of the current market value.
The demand side shows resilience, and the boom degree is expected to rise month on month when the peak season comes; The supply endpoint restarted expansion, and efficient expansion opened up growth space. 1) As the main dimension of advertising, the current consumer goods are the main support for advertising budget. On the one hand, their delivery is relatively stable, resulting in the weakening of business cycle and more flexibility; On the other hand, the peak season began in May, and the business climate is expected to rise month on month. 2) At the point level, self operated screen points expand the number of cities and improve the density of single cities. With a large increase in the number of points, the 24Q1 gross profit rate is basically flat, which means that the listing rate of new points is less different from the market, and the expansion is efficient.
Game: The buying market tends to be stable, and valuation repair is expected. At present, the valuation of the game sector is below the center, and after entering 2Q, the buying market tends to be stable. Hong Kong stock head game companies have taken the lead in starting valuation repair, and have seen the emergence of blockbuster products (DNF mobile games, McPhen) at the same time. Therefore, it is recommended to focus on the valuation repair opportunities of A-share head companies and high prosperity segment track (Sail&Games) companies. A-share suggests paying attention to China Taiyue, Kaiying Network, etc; H shares suggest paying attention to Tencent (the best seller on the DNF mobile game list), NetEase and Bilibili.
Education: policy+pattern improvement+triple resonance of performance, and the education and training industry maintains a high profile. In the policy dimension, the current regulation has entered the normalization stage, and the orientation of out of school training is a useful supplement to school education. At the same time, the non discipline license plate has been issued in an orderly manner, and the implementation level in various regions has been steadily promoted. The follow-up policies are expected to remain stable. The supply of the industry dimension is clear, the demand is strong, and the supply and demand mismatch trend continues. The head office has obvious advantages of stock outlets+new approval compliance, and is expected to take the lead in benefiting. At present, the revenue/profit of the head institutions has returned to double-digit growth. Hong Kong and US stocks suggest focusing on New Oriental, Good Future, Excellence and Delightful Thinking, while A-shares suggest focusing on Xueda and holding high. In addition, it is suggested to pay attention to the dividend attribute of higher education sector.
Risk tip: The epidemic situation is repeated, and the media, education, and Internet policies and supervision policies are tightened again. Some companies' performance is less than expected, and the recovery of users' consumption ability is less than expected.
