Key points of investment

Incident: In the first half of 2024, the company achieved operating income of 0.488 billion yuan, an increase of 1.26% year on year; net profit to mother was 0.221 billion yuan, an increase of 13.53% year on year; the company plans to distribute a cash dividend of 0.96 yuan (tax included) for every 10 shares to all shareholders, with no increase.

The core business grew steadily, and the business model continued to be optimized. The company is the market operator of Shandong Radio and Television's audiovisual new media business, and is building six major industrial segments: “Haiwatch IPTV, Haiwan Digital Application, Haijian Science and Innovation, Haiwatch Industry Development, HaiView Copyright, and HiView Investment”. The main business is the IPTV business, and it also operates other businesses. Among them, the IPTV business is the company's main source of revenue. IPTV business: Authorized by Shandong Radio and Television, the company exclusively operates the Shandong IPTV integrated broadcast control service business to build the “Haiwatch TV” brand. It is divided into basic services and value-added services according to differences in program content provision and end user payment methods. The basic business mainly provides basic audiovisual program services to end users, mainly live broadcasts, time-lapse, replays of central and provincial TV channels, and local channels in Shandong Province, as well as free basic on-demand content such as movies, TV series, and variety shows. In this business, telecom operators charge basic viewing fees and pay share revenue to the company. Value-added services: Providing personalized on-demand audiovisual program services to end users. In this business, cooperative telecom operators charge value-added service subscription fees and pay share revenue to the company. The overall IPTV business is developing steadily. In response to the requirements of the State Administration of Radio, Film, and Television, the second phase of “double governance” has been carried out in depth, and measures such as the Aizang General Platform has the same rights as Haiwatch On Demand and the 7-day rectification of IPTV in Shandong. The company achieved IPTV basic business revenue of 0.401 billion yuan, an increase of 3.03% over the previous year. Effective basic business users reached 16.9362 million, and achieved IPTV value-added business revenue of 71.7302 million yuan.

Integrate your strengths to expand your business boundaries, and gradually establish a short drama ecosystem. The company's other businesses mainly rely on the company's platform, technical capabilities and content resources to provide customers with content services represented by copyright operation and marketing, and operational services represented by customer acquisition business and technical services. In terms of content services, we cooperate with downstream (mobile video, short video, Internet TV, etc.) new media operators and provide them with copyrighted content; in terms of operation services, we provide operational support for customer live streaming signal sources, build customized content zones, and export self-developed technology platforms or products.

The company wholly-owned to establish Qingdao Hachijiao Mutual Entertainment Media Co., Ltd., an independent operating platform for the micro short drama project, planned the development layout of “a short drama film and television base+a small short drama product matrix+a batch of boutique short dramas” around the development idea of “producing works, supporting excellent products, and promoting quality products”, and built a total of 103 short drama film and television base with Qingdao West Coast New Area and Sunac Chuang Group (Zangma Mountain, Qingdao). At the same time, the company has reached a strategic cooperation with the platform Remonfix to jointly arrange skits to go overseas, and plans to cooperate with more overseas organizations in Japan, South Korea, Europe and the United States.

The policy effectively promotes the development of the industry, and its own geographical and shareholder advantages are remarkable. Policy side: Starting in 2023, the State Administration of Radio, Film, and Television will carry out complex “double governance” work on the charging and operation of “baby sets” on large television screens. By the end of 2023, the first phase of “dual governance” had achieved the stage goal of “booting up to watch live broadcasts, reducing billing packages by 50%, and improving consumption transparency”, and large-screen users have returned. According to CGTV Sofrey Media Research (CSM) data, in the first half of 2024, the share of live broadcasts rose to 75.4%, and the share of non-live broadcasts dropped to 24.6%; IPTV platforms are an important channel for audiences to watch live content. The audience share of watching live broadcasts through the IPTV platform reached 30.8%, up 12.3% from the previous year. Regional advantage: According to statistics from the Shandong Provincial Communications Administration, by the end of the first half of 2024, there were 47.251 million fixed broadband users in Shandong Province, an increase of 7.0% over the previous year; of these, fiber-optic broadband users accounted for nearly 95%, and broadband users above 100 megabytes accounted for 97.8%. At the end of the reporting period, the number of active users in the company's IPTV basic business was 16.9362 million, and there is still plenty of room for development. Shareholder advantage: The actual controller of the company, Shandong Radio and Television Station, is a provincial broadcasting agency established by the Shandong provincial government in accordance with law. The company's industry is one of the top ten industries supported by the conversion of old and new kinetic energy in Shandong Province.

Investment advice: The company relies on provincial broadcasting agencies and has clear industry policy guidance. Regional advantages and industry development help the main business grow steadily. We predict that the company's net profit from 2024 to 2026 will be 435/460/494 million yuan; EPS will be 1.04/1.10/1.19 yuan; PE will be 20.3/19.2/17.9; initial coverage, and a “holdings increase-A” proposal will be given.

Risk warning: Uncertainty about the policy of the industry in which it is located, the risk of high concentration of revenue sources, the risk of changes in preferential tax policies, the risk of macroeconomic downturn, etc.