The incident company released its three-quarter report for 2024: in the third quarter of 2024, the company achieved operating income of 3.318 billion yuan, a year-on-year decrease of 7.14% (data for the same period in 2023 was adjusted, same below); net profit to mother was 0.38 billion yuan, a year-on-year decrease of 27.41%; net profit after deducting non-return to mother was 0.314 billion yuan, a year-on-year decrease of 26.80%. In the first three quarters of 2024, the company achieved operating income of 10.278 billion yuan, a year-on-year decrease of 0.85%; net profit to mother of 1.444 billion yuan, a year-on-year decrease of 18.96%; net profit after deducting non-return to mother of 1.226 billion yuan, a year-on-year decrease of 23.98%.

The new media business continued to develop, and the supply of high-quality programs continued in the third quarter of 2024. The company's Mango TV launched a total of 31 variety shows of various types, ranking first among the four “Aiyou Tenmang” platforms. Many classic and popular variety shows, such as “Hello, Saturday 2024,” “Chinese Restaurant 8,” and “Beyond the Thorns 4,” performed well, ranking at the top of the Taiwan and Internet rankings. The broadcast volume of the “Chinese Restaurant” series has exceeded 0.3 billion. With the continuous supply of high-quality variety content, the company is already in a leading position in the field of variety show production and broadcasting.

Cultural technology is deeply integrated. AIGC helped reduce costs and increase efficiency. AIGC's “Mango Big Model” has passed the Internet Information Office filing review. It can support various industry application scenarios such as creative planning, content creation and generation, character anthropomorphic dialogue, and generative content recommendation, promoting further breakthroughs in the company's original AI functions and achieving AI capability coverage for all scenarios of the company's program creation, advertising and platform operation. At the same time, the Shanhai Short Drama Intelligent Production Platform, a vertical tool for skits based on the big model and AIGC, is expected to be released in the near future. With the continuous application of AIGC technology, the company is expected to further reduce costs and increase efficiency. The company's three-quarter report shows that management expenses were 0.257 billion yuan, and the management fee ratio was 2.50%, down 1.3 pct from the previous year. AIGC enabled the company to reduce costs and increase efficiency, which is expected to help the company increase its performance in the future. Furthermore, the company's profit level declined significantly year-on-year during the year, mainly due to the expiration of the tax policy.

Investment advice: We believe that the company's new media business has maintained steady development, and that its variety shows have strong market competitiveness. At the same time, the implementation of artificial intelligence and other related technologies on the application side is expected to help the company improve operating efficiency and achieve cost reduction and efficiency in the long term. The company's net profit for 2024-2026 is estimated to be 1.971/2.156/2.419 billion yuan, respectively, and the corresponding PE is 25x/23x/21x, maintaining the “recommended” rating.

Risks indicate risks in the policy and regulatory environment, risks in the market for the sale of film and television works, risks of content review and review, and the risk of increased market competition.