Brief performance review

On October 26, 2024, the company disclosed its third quarter results report. In the first three quarters of 2024, it achieved revenue of 10.278 billion yuan, -0.85%, net profit to mother of 1.444 billion yuan, -18.96% year on year; 2024Q3 achieved revenue of 3.318 billion yuan, -7.14% year on year, and net profit of 0.38 billion yuan, or -27.41% year on year.

Management analysis

Main business performance is steady, income tax is still having an impact on net profit, and operating cash flow has declined due to increased content reserves. Affected by corporate income tax policy adjustments, corporate income tax expenses increased by 0.28 billion yuan over the same period last year, resulting in a year-on-year decline in net profit for the mother. The company's net operating cash flow for the first three quarters of 2024 was -0.325 billion, which increased the company's reserves for high-quality drama content.

Content side performance:

1) Variety: Effective broadcast volume continues to grow rapidly, forming a three-tier variety research and development matrix of “head”, “waist”, and “member customization”, which has dual significance for content richness and increased membership payments. According to Yunhe data, 2024Q3 Mango TV effectively broadcast 2.5 billion variety shows across the network, which is +22% compared to the same period last year. The three programs of 2024Q3 “Hello, Saturday 2024”, “Chinese Restaurant 8”, and “Crossing the Thorns 4” performed well, ranking in the top 3 of Taiwan and Internet domination lists. Mango TV will broadcast 31 variety shows in the new season, ranking first among the four platforms of Aiyou Tengmang.” The company's variety content matrix: the head is represented by popular variety shows such as “Singer 2024” to help Mango TV attract new members, and the waist is represented by various vertical categories such as “Travel Any Door” to fill in the richness of content. In July 2024, the new member variety brand “Little Fun Collection” was officially released, and 11 “Little Fun” variety shows were released at once. Currently, more than 10 members-specific variety shows have a Douban rating of 9 or more.

2) Episode: Drive members' revenue generation and increase the number of members' content broadcasts. The contribution of 2024Q3 company series to members' revenue generation has increased. According to Yunhe data, the proportion of effective broadcasts of Mango TV member content reached 79%, an increase of 16% over the previous year, ranking first among long-term video platforms. “You Are More Beautiful Than Starlight” and “Private Romance” entered the Q3 series member content effective broadcast list.

3) Short dramas: The number of releases in a single month is close to 30, and derivative micro-dramas or micro-content are created based on the company's popular drama IP.

4) Going overseas: The influence of content has increased, and new downloads have continued to grow rapidly. Currently, the number of overseas downloads of the Mango TV International App has risen from 0.13 billion last year to 0.21 billion, with Europe and the US accounting for 5.3% of new downloads, and the 0.26 billion target of the “doubling plan” for the whole year is expected to be achieved.

Profit Forecasts, Valuations, and Ratings

We expect the company's net profit to be 1.964/2.161/2.465 billion yuan in 2024-2026, corresponding to a PE of 25.53/23.2/20.34X, maintaining a “buy” rating.

Risk warning

Content performance falls short of expectations; user growth falls short of expectations; risk of advertisers' demand recovery falling short of expectations; risk of leaving the core team.