2Q24 net profit to mother was higher than our expectations

The company announced 1H24 results: operating income of 3.31 billion yuan, a decrease of 6.8%; net profit to mother of 0.42 billion yuan, a decrease of 18.0%; net profit of non-return to mother of 0.35 billion yuan, an increase of 11.0%. Among them, 2Q24's revenue was 1.71 billion yuan, down 7.1%, higher than our expectations; net profit to mother was 0.31 billion yuan, up 16.2%, higher than our expectations, mainly due to the current investment income exceeding our expectations.

Development trends

The radio and television business promotes standardized governance, integrating media services and differentiating the performance of smart radio and television 5G services. The company's 1H24 smart radio and television business revenue was 2.15 billion yuan, a year-on-year decrease of 6.2%. Among them, revenue from the integrated media business and the smart radio and television 5G business decreased by 17.0% and 2.9%, respectively. The integrated media platform service covered 61.29 millionIPTV users, 0.11 billion pay-TV users, 52 million active pay-TV users, and 37 million interactive on-demand users, maintaining a relatively wide range of users; the number of 5G radio and television users surpassed 1.5 million, and 5G capabilities were used to initially complete the construction of China Radio and Television's first government extranet wireless network within 1H24. We believe that the company is actively participating in the management of the IPTV and Internet TV “baby charging” problem, and that the traditional radio and television business may still be under pressure; while the company is actively expanding 5G integrated users in the smart radio and television 5G business, or continues to use its licensing advantages to serve the government and enterprise markets.

The cultural tourism business recovered steadily in 1H24, and retail revenue was under relative pressure. The total revenue of the company's 1H24 cultural consumption business was 1.04 billion yuan, a year-on-year decrease of 5.6%. Among them, revenue from the cultural tourism business was 0.68 billion yuan, up 12.4% year on year; revenue from retail business was 0.18 billion yuan, down 27.9% year on year; and revenue from cultural real estate business was 0.18 billion yuan, down 27.0% year on year. We believe that the domestic cultural tourism market recovered steadily in the first half of the year, mainly reflected in a year-on-year increase in the number of travelers; while retail business revenue is under relative pressure or influenced by consumer confidence and consumer preferences, we believe that the company actively promotes the integration of digital technology with the cultural tourism industry chain, or may help improve the level of refined operation and promote the vitality of cultural tourism consumption.

2Q24 The operating efficiency of the main business may be relatively stable, and profits are affected by current investment income. The company's 2Q24 gross margin was 31.9%, down 1.5ppt year on year; sales expense ratio, management expense ratio, and R&D expense ratio were 10.0%, 12.2%, and 2.6%, respectively, which was basically stable year on year. We judge that the operating efficiency of the company's main business is relatively stable, and 1H24's net profit was mainly affected by the company's investment income of 92.996 million yuan in Aishang TV Media Co., Ltd. (1H23 was 18.791 million yuan during the same period), and there were certain fluctuations.

Profit forecasting and valuation

We maintain our 2024/2025 net profit forecast unchanged. The current stock price corresponds to 28.5/26.2 times 2024/2025 P/E. Maintaining a neutral rating, maintaining a target price of 6.3 yuan, corresponding 30/28 times the 2024/2025 P/E, there is 5.2% upside compared to the current stock price.

risks

Competition intensified, and progress in new business fell short of expectations.