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1、 See the last page for disclaimer Page 1 of 15 Equity Research Report Equity Research Sector Report 股股票票研研究究 行行业业报报告告 证证券券研研究究报报告告 传播文化行业传播文化行业 Media&Culture Sector Sector Report:Media&Culture Sector Teddy Lin 林荣叶 行业报告：传播文化行业(86755)2397 6692 .hk 26 December 2022 Growth Certainty of Sub-industries Im

2、proves,Historically Low Valuation Has Great Room for Rebound,Outperform 子赛道的成长确定性上升，历史低位的估值水平具有巨大弹性,“跑赢大市”By comparing and analyzing the operating performance and share performance of each sub-industry of the media and culture sector over the past year,we conclude that the decline in the valuation o

3、f the media and culture sector was far greater than the deterioration in the operating performance of the whole sector in 2022 this was likely due to the markets earlier overreaction amid pessimism about future policies and earnings growth of the sector,in our view.Now with less uncertainties in the

4、 media and culture sector,several sub-industries start to see valuation repairs,especially the movies&entertainment sub-industry.By analyzing the factors of uncertainties affecting the sub-industries and the current outlook on these uncertainties,we argue that while previous pessimism still weigh on

5、 valuation,sectors new growth prospect has yet to be fully priced in.We are particularly bullish on the potential for valuation recovery in the interactive home entertainment and interactive media&services sub-industries.Based on the analysis of specific fundamentals of sub-industries in media and c

6、ulture sector,we expect the following key fundamentals to boost the sectors valuation:1)with the normalization of release of game copyright and the expansion overseas,the certainty of revenue growth increases in the game-related sub-industries;2)profitability of video platforms begins to improve sig

7、nificantly,backed by the reliable monetization from short video e-commerce;3)expectations of cinema box office recovery rose on loosening Covid-19 restrictions while the upcoming batch of high-quality movies could also provide additional boost;4)E-commerce marketing will open up niche incremental ma

8、rkets,while optimized pandemic prevention and control policies raise revenue expectations of e-commerce marketing related industries.We rate the sector as Outperform.We recommend Tencent(00700 HK),NetEase(09999 HK),Bilibili-SW(09626 HK),Kuaishou-W(01024 HK),and Joy Spreader(06988 HK).通过比较和分析传媒文化板块的各

9、个子行业在过去一年的运营表现和股价表现，我们判断板块的估值跌幅远超 2022 年全行业运营表现的下滑程度，我们将其主要原因归咎为市场早前对于整个板块未来的政策和盈利成长性的悲观情绪过度反应。目前与传媒行业相关的不确定性逐渐明朗，若干个子行业已开始出现估值修复，其中表现最为突出的是电影娱乐行业。通过分析过去影响股价的不确定性因素以及目前对于这些不确定性的展望，我们认为早前的悲观预期已基本被市场消化，而新的行业成长性仍未反映在股价上，因此未来传媒和文化板块的反弹空间巨大。其中，我们尤其其中，我们尤其看好互动家庭娱看好互动家庭娱乐和互动媒体及服务子行业的乐和互动媒体及服务子行业的潜在潜在估值反弹估值

10、反弹空间空间。基于基于传媒文化子行业具体基本面的分析传媒文化子行业具体基本面的分析，我们预计，我们预计以下几个以下几个重要的因素重要的因素有望提振整个板块的有望提振整个板块的估值：估值：1.随着版号常态化以及游戏出海，游戏板块收入增长的确定性上升；2.视频平台未来的盈利能力开始出现显著的改善，短视频电商为其提供可靠变现能力；3.随着疫情防控政策优化，影线票房收入复苏的预期升温，待上映的优质影片也将进一步助力；4.电商营销开辟长尾增量市场，疫情防控政策优化将提升电商营销相关产业的收入预期。我们给予我们给予行业行业“跑赢大市跑赢大市”评级评级。推荐腾讯(00700 HK)、网易(09999 HK)

11、、哔哩哔哩-SW(09626 HK)、快手-W(01024 HK)，以及乐享(06988 HK)。Rating:Outperform Maintained 评级：跑赢大市跑赢大市 (维持)Media sector performance vs.Hang Seng Index 传媒行业表现 vs.恒生指数(0.6)(0.5)(0.4)(0.3)(0.2)(0.1)0.00.10.2Jan-22 Feb-22 Mar-22 Apr-22 May-22 Jun-22 Aug-22 Sep-22 Oct-22 Nov-22 Dec-22%of returnHISMedia&culture sector

12、 Source:iFinD.Note:The above figures are calculated based on market cap-weighted average share performance in iFinD as at 23 Dec.2022.Sub-industry performance of media vs.Hang Seng TECH Index 传媒板块子行业表现 vs.恒生科技指数(0.6)(0.5)(0.4)(0.3)(0.2)(0.1)0.00.10.20.30.40.5Jan-22 Feb-22 Mar-22 Apr-22 May-22 Jun-22

13、 Aug-22 Sep-22 Oct-22 Nov-22 Dec-22%of returnHSTECHMediaEntertainmentInteractive Media&Services Source:iFinD.Note:The above figures are calculated based on market cap-weighted average share performance in iFinD as at 23 Dec.2022.Sector Report P See the last page for disclaimer Page 2 of 15 Table_Pag

14、eHeader Media&Culture Sector 26 December 2022 Media&Culture Sector 传播文化行业 TABLE OF CONTENTS 1.2022 Market Review:What were the Major Overhangs?.3 1.1.Current Valuation Still at Historical Lows.3 1.2.Despite A Boost from Movies Stocks in November,Overall Share Prices are Still Down Sharply.4 1.3.Earl

15、ier Concerns about Uncertainty were the Biggest Factor Affecting Valuations.6 2.Industry Outlook:We Expect Valuation of Media to Rebound as Growth Certainty Improves.6 2.1.Games-related Sub-industry Has the Greatest Potential for Valuation Rebound.6 2.2.Growth Less Sensitive to Market Expenditure fo

16、r Video Platforms.9 2.3.A Turning Point of Profitability for Short Video Platforms.11 2.4.Short Video E-commerce Gains Incremental Growth from Niche Market.11 2.5.High-quality Movies Ready to be Released,Driving Up the Movies Sub-industry.12 3.Investment Strategy.14 4.Risk Warning.14 WZoWaUgVcXrQvNo

17、M7N8Q9PsQoOmOtRiNqRtRiNnPpQ8OnNyRwMpMsMuOnPpO Sector Report P See the last page for disclaimer Page 3 of 15 Table_PageHeader Media&Culture Sector 26 December 2022 Media&Culture Sector 传播文化行业 1.2022 Market Review:What were the Major Overhangs?1.1.Current Valuation Still at Historical Lows The media a

18、nd culture sector in Hong Kong saw a significant retracement in valuation in 2022,amid economic downcycle,regulatory uncertainties,as well as a slowdown in technological innovation.The YTD market cap-weighted average return of the Global Industry Classification Standards(GICS)classified media and en

19、tertainment sector was-19.1%(as at 23 Dec.2022),underperforming the Hang Seng Index(-16.3%)but outperforming the Hang Seng Technology Index(-27.3%).The GICS classified media and entertainment sector ranked the 19th among the 24 secondary sectors.The valuation of the sector has recovered significantl

20、y since November,but overall it is still volatile and at historical lows.At the beginning of 2022,the average P/E ratio of stocks in GICS classified media and entertainment sector had the highest valuation(32.5x)among the four valuation benchmarks and was significantly higher than the average P/E ra

21、tio of the main board(22.1x),Hang Seng components(24.3x)and all private enterprises of China(25.1x).But the valuation of media and entertainment sector continued to fall,becoming the lowest from August to November.After the third quarter,Hang Seng components was the first to see significant P/E valu

22、ations recovered.And in November,media and entertainment sector also started to pull its valuation back.Driven by the improved liquidity and more friendly regulatory environment,there was a valuation re-rating in November the market cap-weighted share performance saw a 42.2%increase.But since Novemb

23、er,valuation of media and entertainment sector had fluctuated wildly.The media and entertainment sector are now back at the top of the four valuation benchmarks,which was 27.9x as of 23 Dec 2022,but only slightly above the average P/E ratio of Hang Seng components(25.5x).Figure-1:The performance of

24、the media&entertainment sector was in the lower reaches among sectors-19.1%-45%-35%-25%-15%-5%5%15%25%35%45%Consumer ServicesFood&Staples RetailingEnergyTelecommunication ServicesTransportationInsuranceFood,Beverage&TobaccoHealth Care Equipment&ServicesReal EstateBanksCapital GoodsTechnology Hardwar

25、e&EquipmentHousehold&Personal ProductsDiversified FinancialsRetailingMaterialsSemiconductors&Semiconductor EquipmentPharmaceuticals,Biotechnology&Life SciencesMedia&EntertainmentSoftware&ServicesCommercial&Professional ServicesConsumer Durables&ApparelUtilitiesAutomobiles&Components Source:iFinD,Guo

26、tai Junan International.Note:The above market cap-weighted average share performance are calculated based on iFinD as at 23 Dec.2022.Sector Report P See the last page for disclaimer Page 4 of 15 Table_PageHeader Media&Culture Sector 26 December 2022 Media&Culture Sector 传播文化行业 1.2.Despite A Boost fr

27、om Movies Stocks in November,Overall Share Prices are Still Down Sharply The broadcasting sub-industry maintained a positive rate of return throughout the year,but its performance was overtaken by the movies and entertainment sub-industry at the end of the year.In the case of significant value fall

28、in the whole market,the broadcasting sub-industry(classified by GICS)basically showed a positive rate of return for the whole year.The stock performance of cable&satellite sub-industry(classified by GICS)basically hovered between profit and loss all year.Both of the two sub-industries have shown the

29、mselves more defensive and resilient in the face of subdued macroeconomic and investment sentiment.Other sub-industries of media and entertainment basically maintained negative returns to varying degrees throughout the year,except for the movies&entertainment sub-industry(classified by GICS),which b

30、egan to show a significant positive correction in November.The YTD rate of return of movies&entertainment is higher than that of broadcasting,becoming the sub-industry with the highest annual rate of return so far.Figure-2:The average P/E ratio of the media sector dropped from the original peak to t

31、he lowest,and fluctuated considerably in late 2022 10.015.020.025.030.035.0 Media&Entertainment The main board of Hong Kong stocks Constituent stocks of Hang Seng Index Private Chinese stocks in Hong Kong Source:iFinD,Guotai Junan International.Note:The above average P/E ratios(TTM)are calculated ba

32、sed on iFinD as at 23 Dec.2022,excluding negative and over 500.Figure-3:The broadcastings performance was overtaken by the movies&entertainment at the end of 2022-100%-50%0%50%100%150%200%Movies&entertainmentBroadcastingCable&satellitePublishingInteractive home entertainmentAdvertisingInteractive me

33、dia&services Source:iFinD,Guotai Junan International.Note:The above market cap-weighted average share performance are calculated based on iFinD as at 23 Dec.2022.Sector Report P See the last page for disclaimer Page 5 of 15 Table_PageHeader Media&Culture Sector 26 December 2022 Media&Culture Sector

34、传播文化行业 The performance of the movies&entertainment showed great resilience in 2022 and is currently the highest YTD rate of return among all sub-industries in the media&entertainment sector.As of 23 2021,the movies&entertainment recorded YTD returns of 46.7%,showing strong valuation resilience.Altho

35、ugh cable&satellite and publishing have recorded YTD negative returns,-7.5%and-15.0%,respectively,their overall performances was still significantly better than the Hang Seng Index(-16.3%),showing their strong defensive.Advertising(22.6%),interactive media&services(25.7%)and interactive home enterta

36、inment(26.6%),while underperforming the Hang Seng Index,slightly outperforming the Hang Seng Technology Index(-27.3%).The share performance of Tencent Music and Autohome stood out.The majority of leading companies in the media sector(we selected companies with a market value of more than HK$10 billi

37、on)saw a significant decline in valuation in 2022.Except Tencent Music(69.0%)and Autohome(11.3%),the share prices of leading companies in media sector are all down significantly TYD.Among them,Cloud Music(-51.7%),Bilibili(-48.1%),Weibo(-40.2%)and China Literature(-39.1%)fell more than 35%.Table-1:Th

38、e performance of leading companies in media and their corresponding valuations Code Name YTD perfromance P/E(TTM)P/S(TTM)Total market cap(HKD bn)00700 HK Tencent-29.9%14.6 4.8 3,066 09999 HK Netease-28.1%14.7 3.4 372 09888 HK Baidu -22.5%60.0 2.2 310 01024 HK Kuaishou -3.7%-13.3 2.9 299 01698 HK Ten

39、cent Music 77.0%31.6 3.4 111 09626 HK Bilibili-48.1%-8.0 3.0 74 09898 HK Weibo-40.2%75.9 2.2 35 02518 HK Autohome 14.6%19.2 4.2 33 00772 HK China Literature-39.1%24.7 3.0 30 09899 HK Cloud Music-51.7%9.2 1.6 16 01060 HK Alibaba Pictures-21.1%60.7 3.1 15 02013 HK Weimob-26.5%-14.8 5.5 15 00811 HK Xin

40、hua Winshare Publishing-12.4%4.0 0.5 11 Figure-4:The movies&entertainment showed great resilience while cable&satellite and publishing showing strong defensive 46.7%19.8%-7.5%-15.0%-22.6%-25.7%-26.6%-40%-30%-20%-10%0%10%20%30%40%50%60%Source:iFinD,Guotai Junan International.Note:The above market cap

41、-weighted average share performances are calculated based on iFinD as at 23 Dec.2022.Source:iFinD,Guotai Junan International.Note:Above figures are based on iFinD as at 23 Dec.2022.Sector Report P See the last page for disclaimer Page 6 of 15 Table_PageHeader Media&Culture Sector 26 December 2022 Me

42、dia&Culture Sector 传播文化行业 1.3.Earlier Concerns about Uncertainty were the Biggest Factor Affecting Valuations We believe the sectors previous valuation de-rating was mainly due to the markets concern about the future uncertainty rather than the weakness in operating performance.We believe the strong

43、 resilience of share price in the movie and entertainment sub-industry was mainly due to the higher certainty of the expectation of recovery in cinema box office.Broadcastings high growth in revenue and net profit makes the industry a very defensive investment.The Covid-19 pandemic severely impacted

44、 advertising revenue growth,and we believe the revenue forecast cut is an important factor affecting the valuation.We believe there is a divergence between the valuation and the operating performance in the interactive home entertainment and interactive media&services sub-industry,and the pessimisti

45、c sentiment of uncertainty is more affecting the markets valuation expectations,resulting in severe valuation damage to the sub-industries.Based on the significant improvement and clarity of the current Covid-19 prevention policies and the gradual clarity of the policy environment for the media-rela

46、ted industries,the future valuation of the media and culture industry will see a significant repair.The sub-industry of interactive home entertainment and interactive media&services,which suffered the most from valuation damage,have a particularly large room for rebound in valuation,given the gradua

47、l removal of uncertainty in their industries,in our view.Table-2:The operating performance and valuation performance of each sub-industry in media and culture Sub-industry 1H22 revenue growth 1H22 operating profit growth 3Q22 revenue growth 2022 revenue growth consensus forecast 2022 net profit grow

48、th consensus forecast YTD market cap-weighted average share performance Movies&entertainment-6.0%-0.9%-11.3%-4.3%60.6%46.7%Broadcasting 32.9%-35.4%n.a.109.2%254.2%19.8%Cable&satellite 9.4%7.2%n.a.n.a.n.a.-7.5%Publishing 4.0%113.9%3.8%n.a.n.a.-15.0%Advertising 12.1%-5.2%-4.9%32.4%223.9%-22.6%Interact

49、ive media&services 5.5%-21.2%5.9%6.8%-0.1%-25.7%Interactive home entertainment 7.6%276.2%198.3%13.3%39.8%-26.6%2.Industry Outlook:We Expect Valuation of Media to Rebound as Growth Certainty Improves 2.1.Games-related Sub-industry Has the Greatest Potential for Valuation Rebound Over the past year,th

50、e overall valuation of the game-related sub-industry has fallen far more than the decline in sales scale.As of 22 Dec.2022,the market cap-weighted average price-to-sales ratio(TTM)of the 13 Hong Kong-listed leading companies in game industry we selected was 4.68,down 24.5%YTD.According to Bloomberg

51、consensus estimates,the market cap-weighted average revenue growth for 13 Hong Kong-listed leading companies in game industry is estimated to be-8.2%in 2022 and 10.9%in 2023,respectively.We believe the current valuation has fully reflected the markets pessimistic expectations.Although the valuation

52、of the whole sector began to recover in November,it is still at the lowest point since 2016.We dont see much downside to valuations going forward.On the contrary,the leading game companies now have room to grow by launching games overseas,and valuations are expected to bounce back on performance.Sou

53、rce:iFinD,Guotai Junan International.Note:Above figures are based on iFinD as at 23 Dec.2022.Sector Report P See the last page for disclaimer Page 7 of 15 Table_PageHeader Media&Culture Sector 26 December 2022 Media&Culture Sector 传播文化行业 Table-3:Revenue and P/S ratio of game companies listed in Hong

54、 Kong Company Code Fundamental Currency Revenue(mn)P/S Ratio Market Cap 21A 22F 23F 24F 22F 23F 24F HKD mil Game Sector Tencent 00700 HK CNY 675,083.3 618,175.1 686,162.1 769,061.9 5.0 4.5 4.0 3,086,912 Netease 09999 HK CNY 105,587.3 107,867.6 116,868.1 127,923.4 3.4 3.2 2.9 371,748 Xd Inc 02400 HK

55、CNY 3,203.8 3,684.8 4,994.5 6,374.4 2.7 2.0 1.6 9,897 Netdragon 00777 HK CNY 8,479.5 9,034.0 10,337.0 11,663.6 1.0 0.8 0.7 8,792 Cmge Technology 00302 HK CNY 4,768.7 3,917.8 5,073.8 6,469.2 1.1 0.8 0.7 4,346 Igg Inc 00799 HK USD 6,050.9 5,365.4 5,725.2 5,814.9 0.6 0.6 0.6 3,401 Qingci Games 06633 HK

56、 CNY 1,332.8 1,528.1 2,878.3 n.a.2.2 1.2 n.a.3,284 Archosaur Games 09990 HK CNY 1,107.5 1,101.3 2,089.6 1,389.9 2.8 1.5 2.2 3,118 Friendtimes Inc 06820 HK CNY 1,947.9 1,759.1 2,153.9 n.a.1.2 1.0 n.a.2,137 Homeland Interactive 03798 HK CNY 1,552.0 n.a.n.a.n.a.n.a.n.a.n.a.1,835 Zengame 02660 HK CNY 1,

57、776.5 1,893.2 2,075.8 2,244.5 0.9 0.8 0.8 1,707 Baioo Family Interactive 02100 HK CNY 1,065.3 1,018.7 1,170.5 1,346.2 1.2 1.0 0.9 1,157 Digital Hollywood Interactiv 02022 HK USD 99.1 n.a.n.a.n.a.n.a.n.a.n.a.118 Simple Average 62,465.7 68,667.7 76,320.8 103,587.6 2.0 1.6 1.6 Weighted Average 606,957.

58、8 557,277.3 618,268.3 693,712.6 4.8 4.3 3.9 YoY growth -8.2%10.9%12.2%We expect the regulatory uncertainty to improve as game copyright numbers resume distribution and return to normality.After an eight-month suspension,approval of game copyright began to be released in April this year,and by Novemb

59、er this year,the sixth batch of game copyright were released,and the release of approval of game copyright has been normalized.The number of game copyright released has been slightly increased in the second half of this year.We expect substantial improvement to continue as more of the leading compan

60、ies key games receive the approval of game copyright.Figure-5:The valuation of the game sector fell back to historic lows 0246810121416PS of Game Sector Source:iFinD,Guotai Junan International.Note:The above market cap-weighted average price-to-sales ratio(TTM)is calculated based on iFinD as at 23 D

61、ec.2022.Source:Bloomberg,Guotai Junan International.Note:Above figures are based on Bloomberg as at 22 Dec.2022.Sector Report P See the last page for disclaimer Page 8 of 15 Table_PageHeader Media&Culture Sector 26 December 2022 Media&Culture Sector 传播文化行业 Industry supervision focuses on the protect

62、ion of minors,and the probability of stricter regulatory policies is not high.After reviewing the industry regulatory policies since 2016,we believe that the core of game regulatory policies has always been the protection of minors and leading the quality of cultural products.In terms of the prevent

63、ion of minors addiction to games,major game companies have basically met the regulatory requirements in terms of compliance.We believe that the marginal increment of policy regulation is not much at present,and the probability of further tightening in the future is not high.Peoples Daily Online poin

64、ted out that the digital game industry has great significance to the countrys scientific and technological innovation.At the recent European Union Conference,a resolution was put forward to focus on the development of the digital game industry,calling for a long-term development strategy in Europe t

65、o support the development of start-ups in digital game sector.On November 16,2022,Peoples Daily Online commented on the European Parliament passed a resolution on attaching importance to the development of digital game industry by a large vote,pointing out that digital game have long been rid of the

66、 single attribute of entertainment products,and have become an industry of great significance to a countrys industrial layout and scientific and technological innovation,and proposed that digital game can promote Chinese culture to the world better.The growth of game App downloads has not slowed dow

67、n,reflecting that the demand side has not been significantly affected.According to Qimai,with the exception of February 2022,game App downloads have maintained growth momentum compared to the same period last year.We believe that although the current prosperity of the game industry is not high,the d

68、emand side has not been significantly affected,and the industry prosperity is expected to continue to improve after the economic recovery in the future.Figure-6:The release of approval of game copyright in China is back to normal 6974847270538984841668686 86874560676

69、973700200400600800016002018.12018.22018.32018.42018.52018.62018.72018.82018.92018.102018.112018.1220192020.12020.22020.32020.42020.52020.62020.72020.82020.92020.102020.112020.122021.012021.022021.032021.042021.052021.062021.072021.082021.092021.102021.112021.122022.012022.022022.032022.04

70、2022.052022.062022.072022.082022.092022.11Number of release of game copyright Source:State Administration of Radio,Film,and Television(China),Guotai Junan International.Sector Report P See the last page for disclaimer Page 9 of 15 Table_PageHeader Media&Culture Sector 26 December 2022 Media&Culture

71、Sector 传播文化行业 The rich product line of the future game industry is expected to bring industry growth.With the normalization of game copyright approval,a large number of games are to be launched after 2022.We believe that the game sector is currently in an upward performance cycle with relatively hig

72、h certainty,and the rich product line is expected to drive the performance and thus boost the valuation of the sector.On the other hand,game companies with the ability of independent research and development and self-publishing have made initial achievements in launching games overseas.We expect tha

73、t launching games overseas will become a new world for the growth of large game companies in the future.The market has largely priced in negative sentiment on policy and earnings,and the game sector is still trading at low valuations,with plenty of room for further upside.2.2.Growth Less Sensitive t

74、o Market Expenditure for Video Platforms Both short and long video platforms focus on cost reduction and efficiency improvement,and their operating losses have narrowed significantly.Since 2022,the losses of iQiyi,Bilibili and Kuaishou have all narrowed significantly,and the operating profits of iQi

75、yi and Kuaishous domestic businesses have turned positive.As one of the first enterprises in the video industry to propose cost reduction and efficiency improvement,iQiyi indicated in 4Q18 that the outsourced content was becoming saturated,and it would increase the investment in self-made content in

76、 the future.With the management further indicating that the long video industry has entered a new stage of pursuing efficiency,loss reduction and ultimately profit,iQiyis operating profit margin increased from-13.2%in 4Q21 to 4.1%in 3Q22.In September 2021,Kuaishou adjusted its organizational structu

77、re to allocate resources more effectively,so as to improve the overall efficiency.Kuaishous operating profit rate increased from-23.7%in 4Q21 to-11.3%in 3Q22,among which the operating profit of domestic business was profitable for two consecutive quarters in 2Q22-3Q22.Bilibili has also gradually shi

78、fted its focus to cost reduction and efficiency improvement since 2022,whose operating profit margin in 22Q3 improved by 12.7 ppts compared with 2Q22.Figure-7:Mobile game downloads on the iPhone continued to grow-10%-5%0%5%10%15%20%25%30%35%0.00.51.01.52.0Mobile game App downloads（iPhone）YOY（RHS）Sou

79、rce:Qimai,Guotai Junan International.Figure-8:Bilibili,iQiyi and Kuaishous operating margins improved significantly in 2022-23.5%-34.6%-31.9%-29.3%-13.2%4.1%-40.3%-23.7%-11.3%-50%-40%-30%-20%-10%0%10%Bilibili（%）iQiyi（%）Kuaishou（%）Source:the Companies,Guotai Junan International.Sector Report P See th

80、e last page for disclaimer Page 10 of 15 Table_PageHeader Media&Culture Sector 26 December 2022 Media&Culture Sector 传播文化行业 Costs were effectively controlled while the quantity and quality of video platform users improved.In terms of cost-cutting measures,iQiyi mainly reduced content costs,while Bil

81、ibili and Kuaishou mainly cut sales and marketing expenses.After the number of subscribers peaked,iQiyi paid more attention to cost control and the increase of customer unit price.The proportion of content cost in revenue decreased from 77.1%in 1Q20 to 66.3%in 4Q21,and further dropped to 57.6%in 3Q2

82、2.Compared with iQiyi whose profit model is relatively mature,Bilibili and Kuaishou are still in the stage of rapid growth.They have put higher sales and marketing expenses in 2020-2021 to attract new users.After implementing the strategy of improving profit efficiency,the marketing expense ratio of

83、 Bilibili dropped from 30.5%in 4Q21 to 21.2%in 3Q22,and that of Kuaishou dropped from 53.8%of 3Q21 to 39.5%of 3Q22.While slashing marketing expenses,Bilibili and Kuaishou maintained growth of high-quality users.In terms of volume,Bilibilis MAU increased by 24.5%YoY to 333 mn in 3Q22,while Kuaishous

84、MAU increased by 9.2%YoY to 626 mn during the same period.In terms of user engagement,average daily time spent on Bilibili and Kuaishou was 96 minutes and 129 minutes,respectively,with YoY growth of 9.1%and 8.6%,respectively,hitting their respective record highs.In addition,both Bilibili and Kuaisho

85、u maintained their respective high level of DAU/MAU ratio,reflecting that lower marketing expense ratio did not reduce their user engagement.Given the effect of cost reduction and efficiency improvement of video platforms,we expect future profitability to continue to improve with the recovery of the

86、 macro economy.Figure-9:Operating profit margins of iQiyi,Kuaishou and Bilibili by quarter Figure-10:Bilibilis Kuaishous MAU and YoY growth of MAU 77.1%66.3%57.6%14.0%14.3%16.0%0%10%20%30%40%50%60%70%80%90%iQiyi（%）Bilibili（%）17.1%14.8%13.1%65.0%41.9%39.5%26.2%30.5%21.2%0%10%20%30%40%50%60%70%80%iQiy

87、i（%）Kuaishou（%）Bilibili（%）Source:the Companies,Guotai Junan International.Source:the Companies,Guotai Junan International.Figure-11:Operating profit margins of iQiyi,Kuaishou and Bilibili by quarter Figure-12:Bilibilis Kuaishous MAU and YoY growth of MAU 34.5%24.5%21.4%9.2%0%10%20%30%40%50%60%70%80%

88、00500600700Bilibilis MAU(mn)Kuaishous MAU(mn)YoY growth of Bilibilis MAU(%,RHS)YoY growth of Kuaishous MAU(%,RHS)29.5%26.6%27.1%51.1%55.9%58.1%0%10%20%30%40%50%60%70%Bilibili（%）Kuaishou（%）Source:the Companies,Guotai Junan International.Source:the Companies,Guotai Junan International.Secto

89、r Report P See the last page for disclaimer Page 11 of 15 Table_PageHeader Media&Culture Sector 26 December 2022 Media&Culture Sector 传播文化行业 2.3.A Turning Point of Profitability for Short Video Platforms Live streaming e-commerce effectively drives the incremental market of online shopping,which may

90、 become the most effective way for short video platforms to monetize.According to the data of iResearch,the market scale of live streaming e-commerce in China is expected to reach RMB2,269.7 bn in 2022,with a YoY growth of 83%.Meanwhile,the penetration rate of live streaming e-commerce reached 20.1%

91、in Chinas online shopping market and 7.6%in Chinas total social retail sales.Short video platform attracts consumers into brand broadcasting room through public domain traffic advertising,which is more push and targeted,and helps to promote consumption behavior.According to iResearch,brand self-broa

92、dcast is expected to account for 47.3%of live streaming e-commerce in 2022,and it may be equal with the live streaming of professional broadcasting talents in 2023.Considering that live streaming e-commerce is the first comprehensive e-commerce platform to mature,we judge that short video platform r

93、elying on traffic advantages,will become an important increase in live streaming e-commerce.2.4.Short Video E-commerce Gains Incremental Growth from Niche Market The Covid-19 pandemic has affected advertisers willingness to invest,and the growth of the Internet advertising market slowed down in 2022

94、.According to QuestMobiles data,the 1H22 Internet advertising market was RMB290.4 bn,down 2.3%YoY,as advertisers become more cautious about their advertising budgets due to resurgences in Covid-19.QuestMobile predicted the 2H22 Internet advertising market size to be RMB391.3 bn,up 9.4%YoY,thus the a

95、nnual Internet advertising market size is expected to be RMB681.7 bn in 2022,up 4.1%YoY.As the Covid-19 pandemic has disrupted the domestic supply chain,short video advertising has increasingly become a major choice for advertisers.According to QuestMobile,the proportion of advertising revenue from

96、short video and social networking continued to increase in 1H22.Among the top five types of advertisers,the short video ads of the three vertical industries of beauty,personal care and community dating accounted for more than 40%of their total advertising.Although the overall price of short video ad

97、vertising is relatively high,its effectiveness of brand marketing and conversion rate are significantly ahead of other channels of advertising.With advertisers budgets tight,this trend could continue until 2023.From the demand side,short video ads are the new focus of major advertisers.According to

98、a prediction from QuestMobile,the 2021 YoY growth rate of short video platform advertising(short video ads)revenue reached 31.5%,which was still the brightest among all internet advertising platforms,and the total scale reached RMB108.7 billion.The continuous optimization of content ecology continue

99、s to boost overall user volume and user engagement,becoming the main place for advertisers to grow their marketing.According to QuestMobiles forecasts,short video platform advertising will account for 17.3%of the Internet advertising market in 2022.At the same time,advertising on short video platfor

100、ms seems to be more likely to influence consumers to consume.According to research data from iiMedia,Chinese consumers have higher trust in celebrity product placements on short video platforms and product placement in platform content recommendations(64.8%and 57.9%respectively),while traditional ma

101、rketing models such as TV ads have low influence on consumer purchase desire.Figure-13:The Composition of Media in Chinas Online Advertising Industry 4.1%2.8%2.8%2.7%2.8%28.7%18.6%16.6%14.6%13.3%11.5%13.1%13.2%13.9%14.2%5.8%4.4%4.3%4.3%4.3%10.3%15.2%16.6%17.3%17.4%39.6%45.9%46.5%47.2%48.0%0.0%10.0%2

102、0.0%30.0%40.0%50.0%60.0%70.0%80.0%90.0%100.0%201920202021E2022E2023EE-commerce ADShort video ADOnline video ADSocial ADPan-consulting ADOther AD Source:QuestMobile,Guotai Junan International.Sector Report P See the last page for disclaimer Page 12 of 15 Table_PageHeader Media&Culture Sector 26 Decem

103、ber 2022 Media&Culture Sector 传播文化行业 Beauty care has become the main driver of short video advertising and the niche market may become the incremental market of online shopping.With the development of the e-commerce industry,the niche market has achieved large-scale profitability.According to the re

104、search of Journal of Wuhan Business University combined with our analysis,the Pareto consumption law in the e-commerce market has changed as follows:Since the new display cost and retrieval cost of goods in virtual space market are close to zero,the search costs for mainstream goods and niche goods

105、tend to be the same.Due to increasing competition and economies of scale,the profit margin of the original 20%best-selling products or popular products has decreased.At the same time,the original 80%unpopular products or niche products in the virtual space has obtained scale effect.2.5.High-quality

106、Movies Ready to be Released,Driving Up the Movies Sub-industry Due to resurgences of Covid-19 cases,Chinas box office of movies in 2022 is expected to fall short of that in 2021.According to Maoyan,the total box office of Chinese films was RMB29.2 bn as of Dec 22,2022,and the total annual box office

107、 is estimated to be RMB30 bn,lower than the box office of 2021.The number of local movies released due to the Covid-19 pandemic and the low number of imported movies are the main reasons for the drop in box office.According to Lighthouse Professionals data,before 2020,imported movies were an importa

108、nt part of the Chinese movie industry,accounting for about 20%of the total number of movies and about 40%of the annual box office in China.Although the content quality of domestic movies has improved significantly and the production level of many domestic movies has reached the international first-c

109、lass level,the decrease in the supply of imported movies has a great impact on the overall box office in China.As of Dec.19,2022,only 394 films have been released in theaters this year,down from 677 films released during the same period in 2021,according to Lighthouse Professional.Figure-14:Statisti

110、cs of Digital Marketing Methods that Arouse Consumption Desire/Trust of Chinese Consumers in 2021 64.8%57.9%44.9%32.7%0.0%10.0%20.0%30.0%40.0%50.0%60.0%70.0%Short video platform celebrity implantationPlatform content recommendation advertisingSubway,elevator and other community advertisingTelevision

111、 Advertising(dial-up buy)Source:iiMedia,Guotai Junan International.Sector Report P See the last page for disclaimer Page 13 of 15 Table_PageHeader Media&Culture Sector 26 December 2022 Media&Culture Sector 传播文化行业 On the whole,with the gradual release of supply and strong demand,the North American bo

112、x office showed a significant recovery trend since 2020.According to Box Office Mojo,the box office in North America increased from US$2.1 bn in 2020 to US$6.9 bn in 2022(as at 18 December 2022),with the degree of recovery rising from 18.6%to 60.5%compared with 2019,showing a significant recovery tr

113、end.In terms of film supply,477 films were released in 2022,which is still a big gap compared with 910 in 2019.However,box office revenue of a single film in 2022 was nearly 20%higher than that of a single film in 2019,showing strong demand for films.The upcoming batch of high-quality movies could b

114、oost market confidence.A number of Hollywood blockbusters were released between May and July 2022,during which the North American box office recovered to 82%of the same period in 2019.Due to resurgences of COIVD cases,Chinas box office in 2022 only recovered to 45.4%of that in 2019.In view of the re

115、covery of the North American box office and considering the recent batch of movies ready to be released,we expect the Chinese film industry to show stronger resilience as the disturbance from the Covid-19 pandemic to economic activities has been reduced.Avatar:Access to Water has officially hit Chin

116、ese cinemas,with a cumulative box office of RMB200 mn on its first day of release including on-demand screenings and pre-orders.The film has been trending on social media platforms,which is expected to inject a boost to Chinese cinemas.In addition to Avatar:The Way of Water,we expect that high-quali

117、ty domestic reserve films such as Advancing of ZQ,Sin Nombre and The Wandering Earth will continue to drive upwards performance of movies in China.Figure-15:The Chinas box office in 2022 were much lower than that in 2021 Figure-16:There are fewer movies released in 2022 64.120.347.029.131.7%73.3%45.

118、4%0%10%20%30%40%50%60%70%80%007020022Chinas box office(RMB bn)As a percentage of the 2019 box office(RHS)4254555035678394005006007008002014 2015 2016 2017 2018 2019 2020 2021 2022 Source:Maoyan,Guotai Junan International.Note:The figures for 2022 is up to

119、December 22,2022.Source:Lighthouse Professional,Guotai Junan International.Note:The figures for 2022 is up to December 22,2022.Figure-17:The remarkable recovery trend of the North American box office Figure-18:The North American single-film box office and YoY growth 11.9 11.4 2.1 4.5 7.0 18.6%39.4%6

120、1.9%0%10%20%30%40%50%60%70%0.02.04.06.08.010.012.014.0200212022Total North American box office(USD bn)Percentage of box office in 2019(%,RHS)13.3 14.4 4.3 12.0 15.1 8.5%-70.5%180.5%26.5%-100%-50%0%50%100%150%200%0.02.04.06.08.010.012.014.016.0200212022North American Box Office

121、per film(USD mn)YoY（%，RHS）Source:Box Office Mojo,Guotai Junan International.Note:The figures for 2022 is up to December 23,2022.Source:Box Office Mojo,Guotai Junan International.Note:The figures for 2022 is up to December 23,2022.Sector Report P See the last page for disclaimer Page 14 of 15 Table_P

122、ageHeader Media&Culture Sector 26 December 2022 Media&Culture Sector 传播文化行业 3.Investment Strategy Given the recovery of Chinas box office of cinema and recent batch of high-quality movies ready to be released,we expect the valuation of movies&entertainment sub-industry to continue to improve in the

123、future.Companies that we think will benefit from the recovery of the movies&entertainment sub-industry include Maoyan Entertainment(01896 HK)and China Ruyi(00136 HK).At present,interactive entertainment and interactive media have the slowest valuation repair,but they are also the sub-industries that

124、 we expect to rebound the most after the optimization of expectations on the pandemic and policies.Chinas interactive home entertainment and interactive media&services sub-industry has seen the most severe pullback and the slowest valuation recovery this year.We see policy and earnings uncertainty a

125、s the key factors affecting the valuation in game-related sub-industries.Performance of large game companies is currently in an upward cycle with relatively high certainty.We believe that the market has largely priced in negative sentiment related to policies and previous downward revisions of earni

126、ngs.With the resumption of approval of game copyright and the growth from expanding overseas operations,we expect to see upgraded earnings guidance and valuation upgrades driven by higher-than-expected financial results.Our top recommendations are Tencent(00700 HK)and NetEase(09999 HK).Video platfor

127、ms strategy of cost reduction and efficiency improvement has begun to pay off.We expect large video platforms profitability to exceed expectations in the future.We recommend leading video platfroms,including:Bilibili-SW(09626 HK)and Kuaishou-W(01024 HK).We expect that the growth vitality of short vi

128、deo e-commerce will continue to benefit companies in related industrial chains,especially those engaged in marketing.With the gradual optimization of pandemic control measures and the further penetration of short video e-commerce into online shopping markets,we recommend Joy Spreader(06988 HK),which

129、 is mainly engaged in short video e-commerce sales and marketing,and we believe that its earning will exceed expectations amid the industrys recovery.4.Risk Warning Rick factors:1.Chinas box office may still be severely affected by the Covid-19 pandemic;2.Future game revenue from overseas may be les

130、s than expected;3.The profitability of video platforms may not improve as expected.Sector Report P See the last page for disclaimer Page 15 of 15 Table_PageHeader Media&Culture Sector 26 December 2022 Media&Culture Sector 传播文化行业 Company Rating Definition The Benchmark:Hong Kong Hang Seng Index Time

131、Horizon:6 to 18 months Rating Definition Buy 买入 Relative Performance 15%;or the fundamental outlook of the company or sector is favorable.Accumulate 收集 Relative Performance is 5%to 15%;or the fundamental outlook of the company or sector is favorable.Neutral 中性 Relative Performance is-5%to 5%;or the

132、fundamental outlook of the company or sector is neutral.Reduce 减持 Relative Performance is-5%to-15%;or the fundamental outlook of the company or sector is unfavorable.Sell 卖出 Relative Performance 5%;or the fundamental outlook of the sector is favorable.Neutral 中性 Relative Performance is-5%to 5%;or th

133、e fundamental outlook of the sector is neutral.Underperform 跑输大市 Relative Performance-5%;or the fundamental outlook of the sector is unfavorable.Table_disclosure DISCLOSURE OF INTERESTS(1)The Analysts and their associates do not serve as an officer of the issuer mentioned in this Research Report.(2)

134、The Analysts and their associates do not have any financial interests in relation to the issuer mentioned in this Research Report.(3)Except for CHINA GRAND PHARMACEUTICAL AND HEALTHCARE(00512 HK),LUZHOU BANK(01983 HK),SF REIT(02191 HK),JINSHANG BANK(02558 HK),BANKOFZHENGZHOU(06196 HK),Guotai Junan a

135、nd its group companies do not hold equal to or more than 1%of the market capitalization of the issuer mentioned in this Research Report.(4)Guotai Junan and its group companies have had investment banking relationships with BILIBILI-SW(09626 HK),TENCENT(00700 HK),JOY SPREADER(06988 HK)mentioned in th

136、is Research Report within the preceding 12 months.(5)Guotai Junan and its group companies are making,or will make a market in the securities in respect of KUAISHOU-W(01024 HK)/NETEASE(09999 HK)/TENCENT(00700 HK)mentioned in this Research Report.(6)Guotai Junan and its group companies have not employ

137、ed an individual serving as an officer of the issuer mentioned in this Research Report.There is no officer of the issuer mentioned in this Research Report associated with Guotai Junan and its group companies.DISCLAIMER This Research Report does not constitute an invitation or offer to acquire,purcha

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140、 report may differ or be contrary to opinions or investment decisions made by the asset management and investment banking groups of Guotai Junan.Though best effort has been made to ensure the accuracy of the information and data contained in this Research Report,Guotai Junan does not guarantee the a

141、ccuracy and completeness of the information and data herein.This Research Report may contain some forward-looking estimates and forecasts derived from the assumptions of the future political and economic conditions with inherently unpredictable and mutable situation,so uncertainty may contain.Invest

142、ors should understand and comprehend the investment objectives and its related risks,and where necessary consult their own financial advisers prior to any investment decision.This Research Report is not directed at,or intended for distribution to or use by,any person or entity who is a citizen or re

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