Revenue increased steadily, and the income tax impact still exists. We are optimistic about membership business growth. Maintaining a “buy” rating of 2024H1, the company's revenue was 6.96 billion yuan (+2.46% year over year) and net profit to mother was 1.065 billion yuan (-15.45% year over year); 2024Q2 company's revenue was 3.636 billion yuan (-1.52% year over year), and net profit to mother was 0.593 billion yuan (-16.68% year over year). The decline in profit side was mainly due to the Mango TV business The impact of declining gross margin and changes in preferential corporate income tax policies. We maintain our profit forecast for 2024-2026. The net profit for 2024-2026 is 1.918/2.381 billion yuan, and the corresponding EPS is 1.03/1.17/1.27 yuan respectively, and the corresponding PE price is 19.4/17.1/15.6 times, respectively. We are optimistic that the company's Evergreen Variety Show will drive member revenue growth in the second half of the year, and that the growth of Xiaomang e-commerce GMV will drive the growth of the content e-commerce business and maintain the “buy” rating.
Popular variety shows drive membership revenue growth. The GMV of Xiaomang e-commerce increased, and profitability was pressured by 2024H1 Internet video business revenue of 4.957 billion yuan (-3.57% year over year), gross margin was 36.11% (-6.56pct year over year), or cost increase due to increased content investment. Among them, member/advertising/operator business revenue was 2.49/1.72/0.75 billion yuan, respectively, +26.8%/-3.8%/-46.0% year over year, operator business was governed by IPTV Revenue declined due to the impact of upgrading and optimization. 2024H1 Mango TV launched 56 variety shows, with a year-on-year increase of 17 shows. Among them, the “Singer 2024” program ranked first among provincial TV shows during the same period, or drove member revenue growth; revenue from the interactive entertainment content production business was 0.634 billion yuan (+63.80%), gross margin was 28.09% (-3.33pct year over year); content e-commerce business revenue was 1.357 billion yuan (+8.74% year over year), gross margin was 2.70% (-2.71 pct year on year), Xiaomang e-commerce GMV reached 6.65 billion yuan, a year-on-year increase of nearly 50%. Affected by the decline in gross margin of the main business, the gross margin of 2024H1 was 28.84% (-6.26pct year over year). Income tax expenses increased 32,658.72% year over year to 0.194 billion, resulting in a 3.4pct year-on-year drop to 15.30%.
In terms of reserving rich content for movies and TV dramas, or content that drives a recovery in performance, Mango TV launched variety shows such as “Breaking Through the Thorns 4” (premiered on August 2), “Flowers Bloom” (premiered on August 8), “Continued Sound: Hong Kong Music Season 2” (expected to launch in Q4), and “Flower Fewer 6”, and “Shining Sea of Flowers” at the same time reserves over 80 movies and TV dramas, including “National Color Fanghua” (to be released at the end of July 2024), “People in the Alley”, “Water Dragon Song”, and “Brilliant Wind and Sea””, etc., Evergreen variety shows and potential series are launched in an orderly manner, or drive performance recovery.
Risk warning: Variety show performance falls short of expectations, AI applications fall short of expectations, etc.