Specific event: The company released its 2024 semi-annual report. 2024H1 achieved operating income of 6.96 billion yuan, an increase of 2.46%; net profit to mother was 1.065 billion yuan, a decrease of 15.45%, mainly due to the increase in corporate income tax expenses after changes in preferential corporate income tax policies, which led to a year-on-year decline in after-tax profit (operating profit increased 2.15% year over year to 1.233 billion yuan). Among them, in 2024Q2, the company achieved operating income of 3.636 billion yuan, an increase of 0.07%; net profit to mother was 0.593 billion yuan, a decrease of 16.04%.

The effective broadcast volume of variety shows has steadily ranked first in the industry, and the AI Big Model has been registered. 2024H1 Mango TV launched 56 variety shows (an increase of 17 over the previous year), including “Singer 2024,” “Hello, Saturday 2024,” and “Big Detective 9,” as well as innovative variety shows such as “Rubik's Cube New World” and “Splendid Garden”. It launched 17 movies and TV dramas, and more than 150 vertical screen skits, “Mango Skits”, including the hit “With the Phoenix” and “Big Mangrove Theatre”, which launched the micro-drama “Folding Your Eyebrow”. According to Yunhe data, the 2024H1 Mango TV Network/TV Variety Show Top 20 seats each occupied 7/5 seats, with a market share of 21.6/ 16.6%, ranking first in the industry in terms of effective variety broadcasts. Among them, “Singer 2024” became a 2024H1 superhit with its breakthrough live audio model. The ratings for each episode ranked first on provincial TV in the same period, with a total network broadcast volume of 158.9 billion, and the number of hits on the Mango TV station exceeded 3.8 billion; the series and Tencent co-produced “and “Fengxing” has an effective broadcast volume of 2.95 billion, ranking second in the online series effective broadcast list, and the quality of the content remains stable. Subsequent company variety shows are rich in content, including key variety shows such as “Crossing Thorns 4”, “Flowers and Teenagers 6”, and “Hong Kong Music Season 2”, 80 key movies and TV dramas such as “National Color Fanghua” and “Water Dragon Yin”, and nearly 150 short dramas, animations, documentaries, parties, etc., to jointly promote high-quality content production through a “combination of length and short”, and the content advantages are expected to continue. In addition, the company is actively exploring the direction of AIGC film and television applications. The self-developed “Mango Big Model” has been registered during the reporting period, and has incubated more than 40 related applications, including the first AI director “Aimang” in China, AI performer giant AI Mango Pup, etc., and various business scenarios such as program creation, advertising, platform operation, and video generation.

Accelerate the optimization of the business structure and focus on strengthening member business. 1) Member business: 2024H1 member revenue was 2.486 billion yuan, up 26.77% year-on-year, accounting for 50% + of Internet video business revenue. On the C-side, the company increased member retention and ARPPU value by increasing investment in content and innovating member rights systems to achieve both volume and price increases; on the B-side, the company expanded channel incremental cooperation through project cooperation such as China Mobile Mango Card and Taobao 88VIP. In August, the company and China Mobile subsidiary Migu Culture once again signed the “2024-2026 Overall Cooperation Framework Agreement” It is stipulated that the amount of cooperation during the cooperation period shall not be less than 4.4 billion yuan. Currently, Mango Card sales have exceeded 20 million, and the number of 88VIP members has exceeded 42 million. It is expected that subsequent renewals of new members will further contribute to the increase in performance. 2) Operator business: In order to implement TV industry governance arrangements, operator business declined 46% year-on-year to 0.75 billion yuan due to the increase in recommended free programs on large screens in the short term. In the long run, the company is still expected to benefit from increased user stickiness in the industry as the only market player with both IPTV and OTT licenses. 3) Advertising business: The year-on-year decline was 3.85% to 1.721 billion yuan. The industry recovered slowly in the first half of the year but the overall trend did not change. It is expected that the advertising business will recover faster throughout the year, relying on the company's content and platform advantages.

All platforms are collaboratively integrated, and the future of content going overseas can be expected. In October 2023, the company acquired 100% of the shares of Hunan Golden Eagle Cartoon Media Co., Ltd. in cash. Mango TV used Golden Eagle Cartoon to lay out the children's sector horizontally, forming a comprehensive synergy with the company's existing business in terms of content integration, channel expansion, and brand promotion. The total profit of Golden Eagle Cartoon increased 15% year-on-year during the reporting period, leading the way for parent-child content ratings. Xiaomang e-commerce, on the other hand, relied on Mango's high-quality content IP and artist resources to continue to maintain a rapid development trend. GMV reached 6.65 billion yuan during the reporting period, up nearly 50% year on year, reducing losses by nearly 40%. “My Friends” drove sales of mecha products to nearly 0.5 million pieces, and specialty products and content such as Guofeng Mecha increased the proportion of male users to 30%. Xiaomang Content+e-commerce customized variety show “Journey into Geoshuu 2” achieved a product turnover of nearly 100 million yuan, and the scale of multiple live streaming transactions reached the level of gradual or subsequent exploration at the leading live broadcast room in the industry.” The “Silver Hair Family” market. In addition, the company simultaneously expanded overseas markets and launched a “multiplier plan” in 2024. During the reporting period, the number of overseas downloads of the Mango TV international app exceeded 0.19 billion, with a target of 0.26 billion by the end of the year. Mango TV+ Xiaomang+Golden Eagle Cartoon will fully open up content creation and operation, and will complement the user base, content layout, and customer structure, and is expected to maximize the value of synergy effects.

Profit forecast and rating: Long-term optimism about the company's unique state-owned platform advantages and strong content output capabilities. Rich reserve content in 2024 is expected to drive performance growth. Among them, the company's net profit rose sharply in 2023, due to the preferential tax policy for transforming an operating cultural institution into an enterprise issued in October 2023. Starting in 2024, the company will pay income tax according to the new tax policy. We expect the company to achieve a net profit of 2.06/2.367/2.625 billion yuan in 2024-2026, a year-on-year change of -42%/+15%/+11%, corresponding to PE18/16/14x, maintaining a “buy” rating.

Risk warning: Competition in the industry intensifies, user growth falls short of expectations, and advertising revenue falls short of expectations.