Specific event: The company released the 2024 three-quarter report. In 2024Q1-Q3, the company achieved operating income of 10.278 billion yuan, an increase of 0.80%; net profit to mother was 1.444 billion yuan, a decrease of 18.20%, mainly due to the increase in corporate income tax expenses after changes in preferential corporate income tax policies, which led to a year-on-year decline in after-tax profit (operating profit increased 0.01% year over year to 1.692 billion yuan). Among them, the 2024Q3 company achieved operating income of 3.318 billion yuan, a decrease of 5.39%; net profit to mother was 0.38 billion yuan, a decrease of 26.30%. We expect the decline in performance to be mainly due to the decline in operator business revenue and the lack of resumption of advertising business.

The effective broadcast volume of variety/series increased 22%/16% year over year, respectively, and the platform had a significant advantage. According to Yunhe data, in terms of variety, 2024Q3 Mango has released 31 new variety shows, ranking first among the long-term video platforms. Mango TV effectively broadcast 2.5 billion in variety shows, up 22% year over year. The solo variety shows “Hello, Saturday 2024,” “Chinese Restaurant 8,” and “Singer 2024” ranked in the top 10 TV variety shows, and the solo variety shows “Thunder 4,” “Escape from the Chamber of Secrets 6,” and “Happy Friends 2” ranked in the top 10 online variety shows. In terms of series, the proportion of effective content broadcast by 2024Q3 Mango TV members rose to 79%, an increase of 16% over the previous year, ranking first among long video platforms. “You Are More Beautiful Than Starlight” and “The Four Seas Are Bright” ranked in the top 20 serial screen rankings, and the short drama “Folding Eyebrows” continuously won the top ranking of the provincial government in the same period of China's audiovisual big data. The company has rich content reserves. In terms of variety, Q4 “Goodbye Lover 4” continued to be popular after its launch. Follow-up reserves include key variety shows such as “Endless Sound: Hong Kong Music Season 2”, “Time Concert 4”, and “Mango Freshman Class · Partner Season”. In terms of series, Q4 “Splendid Tranquil” and “City of Sunshine” performed well after launch. Subsequent reserves include “People in the Alley”, “Lucky Family”, “National Color Fanghua”, and “Water Dragon Song”. VP virtually filmed nearly 150 short dramas, animations, documentaries, including the vertical short drama “Safe Evacuation from the Cyber Century” Evening parties and the like will work together to promote the production of high-quality content through a “combination of short and long”, and the advantages of content are expected to continue.

The C-side of the membership business continues to cultivate members' rights, and the B-side continues to expand channel cooperation. Mango TV has over 70 million active members, with active users reaching 0.268 billion in August, ranking among the top three in the video industry. C Side View Company increased member retention and increased customer unit prices by 40% by increasing content investment and innovating member benefit systems, etc.; during the reporting period, the company and 88VIP joined hands to create the “Four Seasons Surprise Night” cooperative brand and once again signed the “2024-2026 Overall Cooperation Framework Agreement” with China Mobile subsidiary Migu Culture, which stipulates that the amount of cooperation during the cooperation period is not less than 4.4 billion yuan. Mango card sales in the dynamic zone have already exceeded 20 million. The sales volume of Mango cards in the dynamic region has already exceeded 20 million. Cooperation with Huawei to complete Hongmeng's native application development is “impossible” “Thoughtful Travel” IP series programs, AIMAX series offline events, and IP customization bring new member benefits to achieve multi-dimensional content cooperation and revenue growth. In addition, the company simultaneously expanded overseas markets and launched a “multiplier plan” in 2024. During the reporting period, the number of overseas downloads of the Mango TV international app exceeded 0.21 billion, with a target of 0.26 billion by the end of the year.

Collaborate and integrate all platforms to accelerate the creation of a content ecosystem matrix. In October 2023, the company acquired 100% of the shares of Hunan Golden Eagle Cartoon Media Co., Ltd., and Mango TV used Golden Eagle Cartoon to lay out the children's section horizontally, forming a comprehensive synergy with the company's existing business in terms of content integration, channel expansion, and brand promotion. During the reporting period, Golden Eagle Cartoon launched a new “dynamic” force — a support program for original Chinese animation, and incubated a number of outstanding animation works. In October, it will launch the “Toy Night” gala in cooperation with the “Toy Capital of China” Chenghai Toys Association. All The flagship of parent-child ecology in the industrial chain. Xiaomang e-commerce, on the other hand, relies on Mango's ecological high-quality content IP and artist resources, and continues to maintain a rapid development trend. In October, Xiaomang e-commerce introduced the “Chinese Animation” section to achieve a deep integration of culture and commerce through a comprehensive integrated marketing model of product+content+channel. Mango TV+ Xiaomang+Golden Eagle Cartoon will fully open up content creation and operation, and will complement the user base, content layout, and customer structure, and is expected to maximize the value of synergy effects.

Profit forecast and rating: Long-term optimism about the company's unique state-owned platform advantages and strong content output capabilities. Rich reserve content in 2024 is expected to drive performance growth. Among them, the company's net profit rose sharply in 2023, due to the preferential tax policy for transforming an operating cultural institution into an enterprise issued in October 2023. Starting in 2024, the company will pay income tax according to the new tax policy. We expect the company to achieve net profit of 1.77/2.04/2.26 billion yuan in 2024-2026, a year-on-year change of -50%/+15%/+11%, corresponding to PE28/25/22x, maintaining a “buy” rating.

Risk warning: Competition in the industry intensifies, user growth falls short of expectations, and advertising revenue falls short of expectations.