For 07, the company posted turnover of 796 million yuan (+21.7% yoy), operating profit of 75.77 million yuan (+20.6% yoy), and net profit attributable to parent of 53.47 million yuan (+18.5% yoy) with diluted EPS of 0.226 yuan. Excluding nonrecurring profit impact, net profit reached 46.64 million yuan (+11.2% yoy) and diluted EPS, 0.197 yuan. Additionally, the company reported a pretax dividend of 1 yuan cash for every 10 shares.
Core business further stood out. Except film and TV, the company’s three mainstays sustained relatively rapid growth. Advertising registered revenue of 397 million yuan, an increase of 64.6% yoy and constituted 50% of total turnover and 74.9% of gross profit. This was mainly because CCTV International, a shareholding subsidiary, strengthened its promotion of this business with improved planning and maturing market operation. Advertising became the most powerful engine behind earnings growth as the company highlighted core business. Meanwhile, thanks to cost reduction and stimulated tourism demand, tourism gross margin hiked up 9.4 ppt. Of which, admission income of the Wuxi Movie/TV Base, one of the national 5A grade tourist scenic areas, increased 12.4% yoy. We expect to see revenue generated by this arm will be turned into profit on the whole and grow by ~10% p.a. going forward.
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Earnings forecast and rating. Considering the company will benefit from tourism expansion and CCTV advertising, we forecast EPS to be 0.49 yuan for 08E (implied EPR of 45x) and 0.56 yuan for 09E (implied EPR of 39x). We do not think future valuation will make the share a highly attractive bargain. Nevertheless, the company is the only listed subsidiary under CCTV. There is a great likelihood that the latter will inject assets into the former with firm support. Reiterate our OVERWEIGHT rating on the counter.