Incidents:
The company released its 2023 annual report: annual revenue of 14.628 billion yuan, up 4.66% year on year after adjustment; net profit to mother of 3.556 billion yuan, up 90.73% year on year after adjustment; net profit after deduction of 1,695 billion yuan, up 5.7% year on year after adjustment. The company released its 2024 quarterly report: revenue for the single quarter was 3.324 billion yuan, up 7.21% year on year; net profit to mother was 472 million yuan, down 13.85% year on year.
The number of members grew at an accelerated pace, and the growth rate of the advertising business picked up
The company's performance continued to grow steadily in 2023, mainly due to the stable supply of high-quality content. In terms of variety, IP sequels such as “Riding the Wind 2023” and “Breaking Through the Thorns Season 3” continue to be popular, and innovative variety shows such as “Happy Friends” and “Women's Mystery Club” have reached Douban ratings of 9 or more. In terms of dramas, the company's own dramas “Go to a Windy Place” and “I Have a Friend” ranked in the top 10 Douban domestic drama ratings in 2023. Driven by premium content, by the end of 2023, Mango TV had 66.53 million active members, up 10.23% year on year, of which 23Q4 member revenue increased 35.64% year on year. At the same time, the advertising business continued to recover. Among them, 23Q4 advertising revenue increased 15.95% year on year, and the growth rate changed from negative to positive. In addition, the subsidiary Golden Eagle Cartoon achieved net profit of 63 million yuan, fulfilling its 2023 performance promise.
High quality content reserves are abundant, and it is expected to be released at an accelerated pace after 24Q2
Looking ahead to 2024, the company has rich reserves of high-quality content. In terms of variety, “Detective 9,” which was launched on 24Q1, had the top market share in March; many blockbuster variety sequels will be broadcast one after another starting in 24Q2. Among them, “Singer 2024”, the “Singer” series, will return for the first time since 2020, and is expected to become the phenomenal variety show of the year. In terms of series, “With Fengxing”, which was broadcast by the company and Tencent Video, had the top market share in March; subsequent reserves include major production series such as “Water Dragon Yin” (the “blockbuster co-creation program” launch project with China Mobile) and “National Color Fanghua” (a cooperative project with Huace Film and Television), which is expected to further boost the company's film and television sector and narrow the gap with industry leaders. In addition, the company will also promote a “plan to double the number of international app users” in 2024 to expand the overseas influence of high-quality content.
Profit Forecasts, Valuations, and Ratings
Considering the expiration of the preferential corporate income tax policy, we expect the company's revenue for 2024-2026 to be 164/180/19.6 billion yuan, respectively, with year-on-year growth rates of 12%/10%/9%, respectively, and net profit to mother of 20.6/22.4/2.42 billion yuan respectively, with year-on-year growth rates of -42%/9%/8%, EPS 1.1/1.2/1.3 yuan/share, and 3-year CAGR of -12%. In view of the scarcity of the company's state-owned enterprise holding video platforms, long-term high-quality content is expected to drive membership growth. We gave the company 25 times PE in 2024, with a target price of 27.5 yuan, maintaining a “buy” rating.
Risk warning: The risk that policies and regulations are becoming stricter, and that the pace of content launch and broadcast conditions fall short of expectations