Incident: On August 22, 2024, Beijing time, Mango Supermedia announced the results for the first half of 2024. In the first half of 2024, the company achieved total operating income of 6.96 billion yuan, a year-on-year increase of 2.46%; realized net profit of 1.065 billion yuan, a year-on-year decrease of 15.45%, mainly due to changes in corporate income tax; net profit not attributable to mother was 0.912 billion yuan, a year-on-year decrease of 22.96%.

The revenue structure has been further optimized, and the core Internet video business is operating smoothly. In the first half of 2024, Mango TV's Internet video business achieved revenue of 4.957 billion yuan, a year-on-year decrease of 3.57%. Among them, the advertising business achieved revenue of 1.721 billion yuan, a year-on-year decrease of 3.85%. The overall recovery trend remained unchanged and fluctuated slightly. We believe that the company relies on solid content advantages and platform traffic advantages, and is expected to accelerate the pace of recovery of the advertising business through innovative marketing strategies and optimization of AI algorithms. The membership business achieved revenue of 2.486 billion yuan, an increase of 26.77% over the previous year, accounting for more than 50% of the Internet video business revenue, and the performance was impressive. The continued rapid growth of the membership business is mainly due to Mango TV's long-term deep cultivation of high-quality content and membership rights systems. The company is steadily increasing users' ARPPU value by increasing content investment and innovating value-added services for members. The operator business achieved revenue of 0.75 billion yuan in the first half of 2024, a short-term decline. We believe that with the improvement of user experience and stickiness in the large TV screen industry, Mango TV, as the only market player with both IPTV and OTT licenses, is expected to benefit in the medium to long term.

High-quality content is steadily expanding, strengthening the position of the industry and increasing user stickiness. In terms of variety shows, in the first half of 2024, the company launched a total of 56 variety shows of all kinds, an increase of 17 over the same period last year. Among them, “The Singer 2024” ranked first on provincial TV in all episodes of the program. The total number of broadcasts on the entire network reached 158.9 billion, and the number of hits on the site exceeded 3.8 billion, making it the program with the highest percentage of new Mango TV members in 24 years. In terms of movies and TV dramas, the company launched 17 movies and TV dramas, including “The River Rises”, “With the Wind”, and “Just in Time”. The broadcast performance was outstanding, and the popular series strongly boosted the rapid growth of membership. In addition, the company has reserved more than 80 movies and TV series, launched more than 150 “Mango Skits”, and is expected to have 300 for the whole year, further enhancing its supply capacity for high-quality series. We believe that Mango TV's continued innovation and increased content supply in the field of variety shows, movies, and TV series may further strengthen its leading position in the industry and promote user stickiness. Comprehensive layout of the children's business. As the leading platform for parent-child content in China, Golden Eagle Cartoon Channel continues to lead the ratings of parent-child content, and its total profit increased by about 15% over the same period last year. At the same time, by creating a closed loop in the entire industry chain of content operation, research, and derivative products, Golden Eagle Cartoon has further strengthened its market competitiveness.

Promote the diversified development of Mango Supermedia through innovation and full chain integration. With content IP and star resources in the Mango ecosystem, Xiaomang e-commerce achieved GMV of 6.65 billion yuan, an increase of nearly 50% over the previous year. Mango Supermedia deepened the layout of the content industry chain and signed 11 new artists, bringing the total number to 77. Furthermore, Mango Supermedia continued to make breakthroughs in the application of AI technology, established the “Mountain and Sea Research Institute” to focus on AI creation, developed its own “Mango Big Model”, incubated more than 40 application products, and launched the first AI director “Aimang” in China.

In overseas markets, Mango TV's international app downloads exceeded 0.19 billion, further expanding its influence in the global market.

We believe that Mango Supermedia's diversification strategy has further strengthened its market competitiveness and promoted continued growth.

Investment advice: Considering the slow recovery of the advertising market in the first half of the year and the company's H1 financial statements, we adjusted the company's 2024-2026 revenue to 154/171/18.5 billion yuan (previous value was 165/183/19.7 billion yuan), up 6%/11%/8% year-on-year, and adjusted the company's 2024-2026 net profit to mother of 19.0/ 21.0/ 2.38 billion yuan (previous value was 21.33/ 22.68/2.595) billion yuan), maintaining a “buy” rating.

Risk warning: Membership and traffic growth falls short of expectations; project progress falls short of expectations; advertisers' intention to launch falls short of expectations; industry regulation and Internet platform regulation are becoming stricter.