Event: The company released its 2023 annual report and 2024 quarterly report
The company released its 2023 annual report and 2024 quarterly report. Revenue in 2023 was 14.628 billion yuan, up 4.66% year on year, net profit to mother was 3,556 billion yuan, up 90.73% year on year, and non-net profit deducted from mother was 1,695 billion yuan, up 5.7% year on year. Non-recurring profit and loss of $1.86 billion, including a one-time adjustment of $1,629 billion in current profit and loss due to adjustments in accounting standards. 24Q1 revenue was 3.32 billion yuan, up 7.21% year on year, net profit to mother was 472 million yuan, down 13.85% year on year, and deducted non-net profit of 467 million yuan, down 10.4% year on year. The main reason for the decline in profits was that income tax expenses were included in the amount of 89 million yuan due to the expiration of the tax policy.
The advertising business is recovering well
The company's advertising business picked up significantly. In 2023, the advertising business achieved revenue of 3,532 billion yuan, a year-on-year decrease of 11.57%, which is significantly narrower than the decline in the first half of the year. Among them, advertising revenue increased 15.95% year on year in the fourth quarter, and the year-on-year growth rate reversed the trend from negative to positive. The reason for the rapid growth in advertising is that the base was low last year, and the combined 23Q4 series, variety products, etc. performed well in investment promotion. Among them, leading IPs such as “Ride the Wind 2023” and “Breaking Through Thorns Season 3” have stabilized the sales market for variety commercials, and “Going to a Windy Place” and “Using Love as a Business” set new records for the company's series in terms of investment amount and number of project partners over the past three years. Q1 series products are off-season, and there are many Q2 products, including “Ride the Wind 2024” (launched on April 19). Looking ahead, it is expected that as the company's series and variety products continue to be launched, advertisers' budgets will be recovered along with macroeconomic recovery, and advertising revenue is expected to recover.
The number of members is growing steadily, and attention is being paid to the increase in ARPPU
Membership revenue for the full year of 2023 was 4.315 billion yuan, up 10.23% year on year, with membership revenue increasing 35.64% year over year in the fourth quarter. The number of active members of “Mango TV” reached 66.53 million at the end of the year, continuing to reach new highs. With the support of high-threshold video content, Mango TV is actively expanding high-quality channels such as China Mobile's Dynamic Zone Mango Card and Taobao 88VIP rights cooperation, and the number of members has been growing steadily.
Continuous verification of content capabilities and attention to subsequent product schedules
The company's variety products have obvious advantages, and continue to supplement series capabilities. According to Yunhe data, in 2023, the effective broadcast volume of full-length variety shows on Mango TV increased by 31% year on year, while the effective broadcast volume of full-network series movies increased 46% year on year, ranking first in the long video industry in terms of growth rate. The company has reached cooperation with companies such as Huace, Noon Sunshine, 2001, and Yuekai Film and Television to comprehensively lay out urban, family, costume, suspense, etc. It is recommended to focus on the 2024 product schedule and the development of long-term drama capacity.
Investment advice: With content distribution and economic recovery, company memberships and advertisements are more flexible. Due to changes in preferential corporate income tax policies, the company paid a 15% tax rate, so the results declined in '24.
We expect the company to achieve net profit of 1,812 billion yuan, 2,021 billion yuan, and 2,306 billion yuan in 2024-2026. The current stock price corresponding PE is 23x, 21x, and 18x, respectively, maintaining the “recommended” rating.
Risk warning: policy and regulatory risks, member business progress falling short of expectations, and fierce competition risks.