2H23 Preview. We expect FILM to produce better results in 2H23 than the previous semester. Our analysis stems from FILM’s ambitious projects scheduled for release in 2H23, such as including Kisah Tanah Jawa, Do You See What I See, and Danur 4, while several highly anticipated titles, like KKN di Desa Penari 2 dan Layangan Putus the Movie, are scheduled for release in 2024. We expect these projects to become positive catalysts for FILM in the future, and we believe market players will react positively to them. In addition, FILM’s margins from cinema movies have improved considerably, as was shown by its margin from KKN di Desa Penari (>70%). Therefore, we expect FILM to book an FY23F net profit of IDR 145 billion and an EBITDA of IDR 274 billion, reflecting a 74.3% EBITDA margin.

Expect better things from FILM. FILM managed to book positive QoQ revenue growth in 2Q23 (+36% qoq to IDR 144 billion) thanks to the success of Sewu Dino, the best-selling Indonesian movie in 2023, with 4.8 million viewers. Also, it is worth noting that the YoY drop was mainly caused by the high base effect from KKN di Desa Penari’s success last year. This year, FILM is focusing its efforts on rebuilding its cinema business; hence, the bulk of its revenue comes from cinema. However, we noticed that FILM might receive substantial gains from IP monetization as FILM plans to produce even more IPs in the future. We included this potential in our forecast and revised our projections of FY24F revenue to IDR 723 billion, EBITDA to IDR 489 billion, and net profit to IDR 276 billion.

BUY, TP IDR 3,800. As we rollover our valuation to FY24F, we reiterate our BUY rating on FILM with a higher TP of IDR 3,800 (DCF based; 9.5% WACC, 5% Tg). We have taken into account FILM’s ability to generate significant cash flow from its IP in making our valuation. Risks: Lower-than-expected ticket sales and digital revenue.