"China's Netflix 2.0" is on the horizon! Haitong International gives CHINA RUYI an initial "Outperform" rating with a target price of HKD 4.5

According to the Zhitong Finance APP, Haitong International has released a research report, initiating coverage on CHINA RUYI (00136) with an "Outperform" rating and a target price of HKD 4.50. The report points out that CHINA RUYI, as a market leader in the full value chain of China's film and television industry, demonstrates the potential for long-term development into a "Chinese version of Netflix 2.0." The report indicates that CHINA RUYI has a broad business layout, covering various fields including content production and distribution (Ruyi Pictures), online streaming (Pumpkin Movies), cinema screening (Wanda Films), online gaming (Jingxiu Games), and IP derivatives. According to data from Lighthouse Professional Edition, the company has created and invested in over 100 film and television copyrights, with a cumulative box office of approximately RMB 40 billion. In the fiscal year 2024 and the first half of 2025, the company's total revenue is expected to be RMB 3.7 billion and RMB 2.2 billion, respectively, with adjusted net profit significantly increasing to RMB 1.25 billion and RMB 1.3 billion. In detail, the company adopts a "producer-centered system" as its core model, possessing strong control over content themes, production, and quality, successfully launching several high-grossing films such as "Hi, Mom," "Hot and Spicy," and "Send You a Little Red Flower." Additionally, by holding a stake in Wanda Films, CHINA RUYI has not only enhanced its cinema screening capabilities but also gained valuable pre-release investment windows for films, further consolidating its advantages in content investment and distribution. As China's largest pure subscription-based streaming platform, Pumpkin Movies places greater emphasis on content quality and provides personalized content recommendations to paying users. As of June 2025, the platform has approximately 99.3 million registered users and 38.1 million paying users, with nearly one million film and television copyrights in reserve. The report believes that with the continuous expansion of exclusive content and the empowerment of AI technology, Pumpkin Movies is on a healthy growth trajectory. The gaming business has become the company's largest source of revenue, contributing 55% of total revenue in the first half of 2025. With the support of Tencent (00700) and several acquisitions, Jingxiu Games achieved nearly 500% compound annual growth rate from 2022 to 2024, providing the company with stable cash flow. Overall, Haitong International believes that with nearly 20 years of experience, strategic investments, and the empowerment of Tencent, CHINA RUYI is moving towards building a high-quality exclusive content library similar to Netflix, which serves both online users (through Pumpkin Movies) and offline users (through Wanda Films), aiming to become an integrated online and offline film and television entertainment platform. The report predicts that CHINA RUYI's adjusted net profit will reach RMB 2.42 billion, RMB 2.63 billion, and RMB 2.73 billion from 2025 to 2027. Based on the PEG valuation method, referencing the industry average PEG level of 0.8 times and the company's 30% compound annual growth rate of net profit, the target price is set at HKD 4.50