24Q2's revenue was 3.64 billion (yoy -1.5%, qoq +9.4%). The month-on-month growth was mainly driven by leading variety shows such as “The Singer 2024” and “Ride the Wind 2024” and leading dramas such as “With the Phoenix”. The Q2 gross profit margin was 29% (yoy-7.9pp, qoq+0.4pp), and Q2 net profit was 0.59 billion yuan (yoy -17%, qoq +25%). The decline in profit was mainly due to a sharp decline in high-margin operator business income due to active implementation of TV industry governance.

24H1 New Media's operating revenue was 4.96 billion billion (yoy -3.6%), and gross margin was 36.1% (yoy-6.6pp). Among them, 24H1 membership revenue was 2.486 billion yuan (yoy +27%). The rapid growth in membership was mainly driven by popular variety shows represented by “Singer 2024” and “Ride the Wind 2024” and popular series represented by “With Phoenix” and “Happy Parent Group”. In addition, the company joined the 88VIP membership system, which we think is also helpful to the number of members. ARPPU has been steadily improving: It mainly innovates the member benefit system, launched more than 300 member benefits, and innovates member value-added services through recorded tickets, customized programs for members, additional rewards, and exclusive benefits for premium members. The 24H1 advertising business is 1.721 billion yuan (yoy -4%), mainly due to the relatively weak recovery of the advertising industry. Judging from the advertising category, quality advertising was the first to recover. The trend is even more obvious, and the recovery of brand advertising is lagging behind. 24H1 operator revenue 0.75 billion yuan (yoy -46%). Mainly companies actively implement TV industry governance and comprehensively optimize TV screen services such as “billing packages,” “single point of payment content,” “order process,” and “free business.”

24H1 New Media Interactive Entertainment revenue 0.63 billion yuan (yoy +124%), gross profit margin 28% (yoy-2pp). The acquisition of Golden Eagle Cartoon increased its contribution. In addition, Tianyu Media signed a total of 11 new artists, and selected contracted artists for internal programs. Music copyright relies on the expansion of professional music artists.

24H1 content e-commerce revenue is 1.36 billion, (yoy +9%), gross profit margin 2.7% (yoy-3pp). The GMV of Xiaomang e-commerce reached 6.65 billion yuan, an increase of nearly 50% over the previous year. Xiaomang e-commerce continues to expand its core circle and push the proportion of male users to 30% through special products such as Guofeng Mecha and customized content.

The company's popular variety IP matrix continues to expand, and the flow of serialized projects is stable. With the introduction of members to the 88VIP new channel, the production of superimposed content-side series has improved, and the Golden Eagle cartoon copyright has broken the circle for children. We expect the company's net profit for 24-26 to be 1.725/1.983/2.276 billion yuan respectively (the original forecast value for 24-26 was 1.993/2.339/2.678 billion yuan, according to the interim report, the new media operating income and comprehensive gross profit margin were lowered). Referring to comparable company valuations, the company will be given 23 times PE in 24 years, corresponding to a target price of 21.16 yuan, to maintain the “gain” rating.

Risk warning

Strict industry regulation, fierce market competition, risk of bad artists, investment returns fall short of expectations