20220623-招银国际-稻草熊娱乐-02125.HK-Moderate_growth_with_focus_on_IP_drama_5页_844kb

Strawbear Entertainment (2125 HK) Summary

Core Content and Key Information

Strawbear Entertainment is a company in the Chinese internet and entertainment sector, primarily engaged in the production and distribution of drama series. The company's focus is on IP-driven drama series, which has become a significant part of its business strategy. The report outlines the company's financial performance, future outlook, and market position, with a recommendation to maintain a BUY rating.

Financial Performance

• Revenue for FY20A was RMB952mn, increasing to RMB1,703mn in FY21A, representing a 78.8% YoY growth.
• In FY22E, the company is expected to report RMB1,705mn in revenue, with a 0.1% YoY growth, indicating a back-end loaded year due to conservative title releases.
• Revenue is projected to grow to RMB2,020mn in FY23E and RMB2,400mn in FY24E, with 18.5% and 18.8% YoY growth, respectively.
• Adj. net profit for FY20A was RMB131mn, rising to RMB194mn in FY21A, and expected to reach RMB195mn in FY22E, with further growth to RMB231mn in FY23E and RMB276mn in FY24E.

Earnings and Profitability

• Adj. net margin remains stable at 11.4% to 11.5% across FY22E to FY24E.
• Operating margin is projected to increase from 15.7% in FY22E to 16.1% in FY24E.
• ROE is expected to grow from 9.8% in FY22E to 11.1% in FY24E.

Key Revenue Streams

• Broadcasting rights account for 65.0% of revenue in FY22E, with a steady contribution from this segment.
• Made-to-order (MtO) drama series production constitutes 31.7% of revenue in FY22E.
• Others make up 3.3% of revenue in FY22E.

Market Position and Strategy

• Strawbear is focusing on high-quality IP dramas and is more selective in content production due to a regulatory environment and platform strategy adjustments.
• The company is diversifying its online channels by collaborating with platforms such as Tencent, Mango TV, and Migu.
• In 1H22, the launch of The Bachelors (追爱家族), a self-produced drama, contributed positively to the topline momentum.

Future Outlook and Investment Recommendation

• The report forecasts revenue recovery in 2H22 and FY23E, driven by a solid pipeline of upcoming dramas.
• The target price is set at HK$3.74, with a P/E ratio of 10.0x for FY23E.
• The current price is HK$2.84, indicating a potential upside of +32%.
• The BUY recommendation is maintained due to the company's potential for growth and strong content pipeline.

Peer Comparison and Valuation

• Strawbear is compared with other companies in the film & drama and internet giants sectors.
• P/S ratios are expected to decline from 0.9 in FY22E to 0.6 in FY24E, indicating a potential value increase.
• P/E ratios are expected to decrease from 7.8 in FY22E to 5.6 in FY24E, suggesting valuation compression.
• The EVEBITDA ratio is projected to decrease from NA in FY22E to 5.0 in FY24E.

Key Ratios and Metrics

• Operating margin is expected to increase from 15.7% in FY22E to 16.1% in FY24E.
• Pre-tax margin is forecasted to rise from 16.0% in FY22E to 16.2% in FY24E.
• Adj. net margin is projected to remain stable at 11.4% to 11.5%.
• Effective tax rate is expected to remain consistent at 31.2%.
• ROE is projected to increase from 9.8% in FY22E to 11.1% in FY24E.

Shareholding and Financial Metrics

• Shareholding structure is dominated by Leading Glory (41.70%), Taurus Holding (13.97%), and Gleason Global (10.57%).
• Market capitalization is HK$1,978mn.
• Average 3-month total return is 2.48mn.
• 52-week high/low is HK$8.66/HK$2.14.
• Total issued shares are 697mn.

Analyst Certification and Disclosures

• The research analyst certifies that the views expressed are accurate and reflect personal opinions.
• There are disclosures regarding conflicts of interest and investment banking relationships with the companies covered.
• The report is not tailored to individual investors and should be independently evaluated.

CMB International Global Markets Limited

• CMBIGM is a wholly owned subsidiary of CMB International Capital Corporation Limited, which is in turn a subsidiary of China Merchants Bank.

Risk and Disclaimer

• The report highlights risks associated with securities trading.
• It is not suitable for all investors and is intended solely for information purposes.
• The value of investments is uncertain and not guaranteed.
• The report may not be reproduced or distributed without prior written consent from CMBIGM.

Distribution Restrictions

• The report is intended for specific recipients in Hong Kong, the United Kingdom, the United States, and Singapore.
• It is not available to all investors and is subject to legal and regulatory constraints in each jurisdiction.