The year-on-year increase after deducting non-net profit. 1) In the first half of '24, we achieved operating income of 0.399 billion yuan and net profit of 0.051 billion yuan, with year-on-year increases of 7.56% and -44.04%, respectively, corresponding to fully diluted EPS of 0.07 yuan; the sharp decline in net profit to mother was mainly due to the impact of more investment benefits in the same period of the year; excluding the impact of related factors, net profit deducted from mother was 0.049 billion yuan in the first half of the year, an increase of 11.79%; 2) Q2 achieved operating income of 0.224 billion yuan in a single quarter Net profit to mother was 0.038 billion yuan, up -6.1% and 2.2% year-on-year respectively, corresponding to EPS 0.05 yuan; 3) The medium-term plan distributes profits of 0.08 yuan (tax included) for every 10 shares to distribute profits to all shareholders, without sending shares or transferring share capital from the capital reserve fund.

Content service capabilities continue to improve, and customer stickiness remains high. 1) In addition to image services, the company continues to develop audio, video and 3D content resources. Currently, the total amount of audio and video materials exceeds 46 million, and the related business revenue ratio has increased from 5.16% in the same period last year to 31.99%. At the same time, in the first half of the year, it strategically invested in 3D content company Jingzhi 3D and its subsidiary - finding her, creator community, and the trading platform CG model network to further enrich content resources; 2) customer service, KA client companies relied on the vcg.com website to give full play to the advantages of all categories of content; small and medium-sized enterprises provided an efficient, simple, standardized, and highly self-service online e-commerce platform; e-commerce transaction sales increased to 29.21% of total revenue from 15.66% in the same period last year; the C-side user market was built through an open API platform to The B2B2C model is empowered by AI intelligence technology; it cooperates with large-scale platforms such as Alibaba, Tencent, Baidu, JD, Jinshan Office, Huawei, Xiaomi, OPPO, VIVO, and Honor, and has established platform-level cooperation with Lenovo, Canva, Wanxing Technology, Xiaoying Technology, Draft Design, and Maker Posts in segments such as video editing, creative design, and video soundtrack.

The “AI+content+scenario” strategy continues to advance. 1) In terms of content data, it has nearly 0.5 billion of high-quality graphic pairs and 0.8 million hours of video and music material, totaling 3 million structured labels and industry knowledge maps; in July '24, the company officially reached a strategic cooperation with Aishi Technology to expand AI video applications; 2) In terms of scenarios, AI intelligent search has been launched on the company's websites VCG.com, veer.com, and VJShi.com to support image and video search; AI office field.

Risk warning: macroeconomic fluctuations; regulatory policy risks; implementation of new technologies falling short of expectations, etc.

Investment advice: Maintain profit forecasts, be optimistic about the possibility that medium- to long-term companies can increase copyright value based on content and scenario advantages under AIGC, and maintain a “superior to market” rating. We expect net profit for 2024/25/26 to be 0.176/0.203/0.221 billion yuan respectively, corresponding to diluted EPS = 0.25/0.29/0.32 yuan, and PE = 43/38/35x corresponding to the current stock price. AIGC Era has significant advantages in copyright operations, data, and creator ecology. It has the potential to revalue resources and reinvent business models. If the advertising market recovers, it is expected that revenue and profits will continue to recover, maintaining a “superior to the market” rating.