Incident: The company released its 2016 semi-annual report, and 24H1 achieved revenue of 5.967 billion yuan, an increase of 8% year on year; in a single quarter, 24Q2 achieved revenue of 3.238 billion yuan, an increase of 10% year on year and 19% month on month. On the profit side, 24H1 net profit to mother was 2.493 billion yuan, up 12% year on year, after deducting net profit from non-return to mother of 2.197 billion yuan, up 11% year on year. Looking at the single quarter, net profit for 24Q2 was 1.439 billion yuan, up 13% year on year, and net profit after deducting non-return to mother was 1.252 billion yuan, up 7% year on year.
Revenue side: Consumer advertisers solidify the basic market and contribute α with AI incremental revenue. The recovery in 24Q2 segment revenue was stronger than the overall macro and advertising markets, and the year-on-year revenue growth rate was somewhat faster than in Q1. The revenue of 24H1 consumer advertisers increased 14% year over year, and the revenue share further increased to 64%, up 3 pcts year over year, and a sharp increase of 11% compared to 23H2. The impact on crowd revenue further increased, becoming the core basic market of segmentation. Communications advertisers maintained a high year-on-year increase. 24H1 communications revenue increased 86% year over year, accounting for 4% of revenue, and up 2 pct year over year, but compared with 23H2 7% revenue share, we expect changes in communication advertising revenue share to be mainly affected by AI application-related advertisers (mainly AI application hardware devices in '23). The short-term development pace of AI applications fluctuates gradually, but this does not change the long-term growth space brought about by deterministic trends in the AI industry.
Cost side: Intensive expansion of low-tier city locations, and stable gross margin. As of July 31, the total number of media outlets in the company's buildings was 3.133 million, an increase of 11% over the previous year. Low-tier cities are the regions with the highest growth rate of self-operated TV media. The number of points in third-tier cities and below increased 69% year over year. At the same time, overseas media points increased 30% year over year, but compared to March 31, the number of points increased slightly. In addition, the number of 24H1 franchise points also achieved a relatively rapid increase of 62%. We anticipate that community smart screens will be a key expansion scenario and medium, and joining may also become an important way to infiltrate low-tier cities. Notably, the increase in operating costs has been slower than the point increase.
Dividends: Mid-term dividends increase the dividend rate, which is expected to further increase the dividend rate. Assuming that the annual dividend in '24 is the same as in '23, plus the current interim dividend of $1.444 billion, the overall dividend for '24 is expected to reach 6.21 billion yuan. Based on the closing price on August 8, the dividend rate will increase to 7.2%.
Profit forecast and investment rating: The company's 24-26 revenue is estimated to be 127, 134, and 13.9 billion yuan, with net profit of 53, 57, and 6 billion yuan. Corresponding PE is 16x, 15x, and 14x, respectively. Based on the company's stable business model, stable industry position, and deep commercial barriers, it maintains a “recommended” rating.
Risk warning: Consumption recovery falls short of expectations, customer willingness to invest is insufficient, and customer industry regulations are becoming stricter.