The target price was lowered from HK$13.17 to HK$7.80, maintaining the “Buy” rating. Based on our predictions for 2024 net profit and current market capitalization, the company is currently valued at 10.0 times the price-earnings ratio. Our adjusted price target is equivalent to 12.7 times the 2024 price-earnings ratio, 8.9 times the 2025 price-earnings ratio, and 7.4 times the 2026 price-earnings ratio.

According to the financial report of Maogan Entertainment (the “Company”) for the first half of 2024, the Company's online entertainment ticketing service business revenue was relatively stable, with a year-on-year increase of 3%, while revenue from the entertainment content service business decreased by 6.9%. In the first half of 2024, Maogan Entertainment achieved revenue of RMB 2.2 billion, down 1.18% year on year, and net profit fell sharply by 29.7% year on year to RMB 0.285 billion. Although the overall box office revenue of Chinese movies fell 9% (mainly due to a decrease in the number of moviegoers), the total revenue of Maogan Entertainment fell by only 1.2%, demonstrating the resilience of its core ticketing business. However, the company's overall cost increase affected net profit, which decreased 29.7% year over year. The increase in costs is mainly due to an increase in sales and marketing expenses, which highlights the need to maintain market share and user loyalty under current industry pressure.

From a macro perspective, the Chinese film industry is currently undergoing an adjustment period, and it is expected that the market will shrink further in the short term.

Although the company maintained stable ticketing revenue, its entertainment content services were affected by industry trends and increased sales costs, leading to a decline in net profit. However, Cat Eye Entertainment is still actively participating in film distribution, showing potential growth momentum. As a leading company in the Chinese ticketing market, the company is expected to benefit from AIGC-driven industry growth trends despite possible short-term valuation fluctuations.

According to industry data analysis, due to industry contraction, Maogan Entertainment may continue to face profit pressure. By the end of August, the total number of movie screenings nationwide had increased by 12.2% year-on-year, but the total number of movie viewers was only 77.8% in the same period last year, compared to 91.2% in the first half of 2024. It indicates that in the second half of 2024, MaoEye Entertainment may face further challenges due to the contraction of the industry. However, the company has shown a high level of participation in film screenings, and the number of films distributed and produced has increased. Looking forward to the future, the company has strong content reserves. Major films will be screened on the National Day and New Year programs, maintaining strong market participation.

Based on adjustments to expectations on the size of the Chinese film market, we lowered Maogan Entertainment's revenue forecasts for 2024 and 2025 by 19.6% and 23.3%, respectively. The adjustment in cost and sales expense expectations also led to a reduction in net interest rate forecasts.

As a result, we lowered our earnings per share forecast for 2024-2025 by 24.6% and 23.7%, respectively. We expect earnings per share for 2024-2026 to be RMB 0.637, RMB 0.822, and RMB 0.977, respectively.