24H1's revenue remained stable, and the net profit to the mother fluctuated due to the tax rate. In 2024, H1 achieved revenue of 6.96 billion yuan (yoy +2.46%) and net profit of 1.065 billion yuan (yoy -15.45%), of which Q2 achieved revenue of 3.636 billion yuan (yoy -1.52%, qoq +9.36%), net profit to mother 0.593 billion yuan (yoy -16.68%, qoq +25.45%) . At the same time, it was announced that cash dividends of 1.8 yuan (tax included) will be distributed for every 10 shares, for a total cash dividend of 0.34 billion yuan. We maintain our profit forecast and expect net profit to mother of 1.93/2.21/2.52 billion yuan for 24-26. Using the segmented valuation method, the estimated target price is 24.05 yuan (previous value 28.59 yuan), maintaining the “buy” rating.

The volume and price of the membership business increased, and the decline in advertising narrowed. The operator business weighed on 24H1 membership business revenue of 2.486 billion yuan, an increase of 26.7%. Thanks to high-quality content (including “Singer 2024”) and the addition of innovative member benefit systems to increase ARPPU value, it is expected that as subsequent series and variety shows continue to be updated, membership business growth will be the main driving force for the company's performance growth; advertising revenue is 1.721 billion yuan, down 3.9%. It is expected that the future will be achieved by stabilizing the investment budget of leading customers, innovating sales models, etc. Operational measures stabilized the advertising revenue market; operator business revenue was 0.75 billion yuan, down 46.0%, mainly due to the decline in revenue from value-added services. The gross profit margin of 24H1 Mango TV's Internet business was 36.11%, down -6.56 pct. Mainly due to the increase in drama costs, the share of business revenue for operators with higher gross margins decreased.

The number of variety shows is leading, and the “track manager” system consolidates its advantages. According to Yunhe data, in the Q2 variety broadcast market share ranking, Mango's effective broadcast market share exceeded 30%, ranking first among long-term video platforms. Among them, “The Singer 2024” became a phenomenal IP. According to China's audiovisual big data, the ratings for each episode of “The Singer 2024” ranked first on provincial TV in the same period. The total number of broadcasts on the entire network was 158.9 billion, and the number of hits on Mango TV exceeded 3.8 billion. Mango TV has always maintained innovation in the refined management of variety show teams. The success of the “studio” system has been verified by high-quality content. Currently, the company continues to introduce a “track manager” system, which implements “track-based” management for content development and production, and divides various variety shows such as stage competition, large-scale innovation, audio, reality shows, and mystery.

The series reserve is rich, and the H2 variety show is worth looking forward to

The company has actively increased its investment in drama content. The company has over 80 movies and TV dramas. A series of works such as “National Color Fanghua”, “People in the Alley”, “Water Dragon Song”, “Brilliant Wind and Sea”, “Long Song”, and “180 Day Restart Plan” all have the potential to be popular series. The focus is on horizontal screen quality dramas, mini-program dramas, interactive content, and micro-summaries to vigorously promote the Mango short drama “Spark Project”. Since this year, Mango TV has launched the “Mango Short Drama” vertical skit channel. More than 150 vertical screen skits have been launched, and it is expected that no less than 300 boutique vertical screen skits will be launched throughout the year. Key programs such as 24H2 “Breaking Through Thorns 4”, “Flowers and Teenagers 6”, “Endless Sound: Hong Kong Music Season 2”, “Flowers Bloom”, and “Dance Madness” are expected to continue to contribute to the increase in performance.

Risk warning: Changes in content supervision policies, project implementation progress is lower than expected, and advertising revenue falls short of expectations.