The company achieved revenue of 3.318 billion yuan (yoy -7.14%, qoq -8.74%) and net profit of 0.38 billion yuan (yoy -27.41%, qoq -35.95%) in Q3. 24Q1-Q3 achieved revenue of 10.278 billion yuan (yoy -0.85%) and net profit of 1.444 billion yuan (yoy -18.96%). Net profit declined sharply, mainly due to changes in preferential corporate income tax policies, after deducting non-net profit of 1.226 billion yuan (yoy -23.98%).

The net profit to the mother was lower than our previous performance forecast (net profit of 0.45 billion - -0.5 billion in 24Q3), mainly due to the fact that the advertising business fell short of expectations. Furthermore, we expect the 24Q3 membership business to grow year-on-year, driven by high-quality content. The IPTV business is expected to decline due to policies, but the decline narrows from month to month. We are still optimistic about Mango TV's ability to produce high-quality content. With the launch of Q4 blockbuster content, it is expected to boost the membership and advertising business. Maintain a “buy” rating.

Variety shows remain at the top, and the number of series broadcast has increased dramatically

According to official WeChat, as of October, the number of active members of Mango TV has exceeded 70 million, and high-quality content has led to an increase in the number of members. According to Yunhe data, in terms of variety, a total of 31 variety shows were broadcast in the new season on Q3 Mango TV. Variety shows were effectively broadcast 2.5 billion times across the network, an increase of 22% over the previous year. The platform officially released the member variety show brand “Little Fun Collection” in July, marking another innovative exploration of business models in the variety field. In terms of series, the proportion of effective broadcasts of Mango TV member content rose to 79%, an increase of 16 pcts over the previous year. “You Are More Beautiful Than Starlight” and “Private Romance” entered the Q3 series to dominate the effective broadcast list of member content. 3) In terms of short dramas, the company launched “730 Damang Theater”, the first gold-grade short drama theater in the country. Among them, “Folding the Eyebrow” was continuously ranked first by China's Audiovisual Big Data during the broadcast period.

Q4 is rich in content reserves, and leading series and blockbuster variety shows are expected to drive membership and advertising growth 1) In terms of variety, the two platforms of Mango TV and Hunan TV currently have 8 program content manager tracks and 49 program production teams. After “Goodbye Lover 4” went live on October 17, it had the highest number of broadcasts. Key programs expected to be released in Q4 include “Endless Sound: Hong Kong Music Season 2,” “Women's Mystery Club 2,” “Time Concert 4,” and “Mango Freshman Class · Partner Season”. 2) In terms of series, the company currently has over 80 movies and TV dramas. The series that have already been broadcast in Q4 include “Splendid Peace” and “The City of Sunshine”. Key highlights released in Q4 include “People in the Alley” and “Lucky Family”, etc., and the opening series of the 25th year include S-level dramas such as “National Color Fanghua” and “Five Blessings at the Door”.

Overseas influence continues to grow, and AIGC is fully involved in content production, maintaining “purchases”. According to Mango TV's official WeChat account, the annual download volume of its international app is expected to reach 0.26 billion, double the 0.13 billion number of downloads last year. On the AIGC side, in July, the Mango Big Model officially passed the Generative Artificial Intelligence (Big Language Model) filing review by the Central Network Information Office, and has been widely used in script production, high-definition broadcasting, and post-production. Considering the slow recovery of the company's advertising business, we lowered the company's profit forecast and estimated the company's net profit to mother for 24-26 was 1.76/1.99/2.23 billion yuan (previous value 1.93/2.21/2.52 billion yuan).

Our SOTP law estimates the company's target market value of 55.89 billion yuan, corresponding to a target price of 29.87 yuan, maintaining a “buy” rating.

Risk warning: Changes in content supervision policies, project implementation progress is lower than expected, and advertising revenue falls short of expectations.