Company Overview: State-owned new media platform to create a diverse and integrated ecosystem. Mango Supermedia is mainly engaged in Internet video, new media interactive entertainment content production, content e-commerce, etc., and is the only state-owned video new media company in the A-share market. In recent years, the company's expense management has been good, and its performance has increased steadily. Net profit to mother reached 3.56 billion yuan in 2023, net profit to mother reached 24.3%, and profitability was steady, moderate and positive.

Industry analysis: The scale of online video is rising steadily, and large-scale TV screen management has achieved phased results. The scale of online video is growing steadily, and more attention is being paid to improving profitability. Among them, long and short video cooperation continues to deepen, and content supply is strengthened to enhance user stickiness. At the same time, membership fees are rising steadily, and the Internet advertising market is expected to pick up. Furthermore, the restructuring of the large TV screen industry has achieved phased results, and local state-owned radio and television companies are expected to benefit and increase the reach rate of IPTV, OTT and other business content.

Business analysis: Continue to consolidate the content moat and explore multiple monetization paths.

On the one hand, the company insists on “content is king” and is committed to the innovative creation of the “variety show+series+short drama” content system, stabilizing internal content procurement, increasing external copyright investment, and strengthening the core competitiveness of high-quality content. The industrial variety production system effectively supports the production of popular shows, and the number and broadcast volume of variety shows is at the leading level in the industry. The series continues to enhance content production capabilities, and it is expected that high-quality series will continue to emerge.

On the other hand, the company relies on IP and traffic advantages to continuously improve its closed business loop and explore multiple monetization paths. 1) Members: The advantages of high-quality content+a complete membership benefit system are obvious, and I am optimistic that the volume and price of subsequent member business will increase rapidly. 2) Advertisements:

Joint investment unleashes the platform's brand value, actively promotes and attracts high-quality advertisers, and a recovery can be expected. 3) Operator: Cooperation with China Mobile has achieved remarkable results, and it is expected that it will continue to tap user value with its license advantages. 4) AI: The AIGC layout is being promoted comprehensively to empower the content ecosystem industry chain.

Profit forecast, valuation and investment rating: We expect Mango Supermedia's revenue for 2024-2026 to be 15.066/16.693/18.48 billion yuan, up +2.99%/+10.80%/+10.71%, respectively. Considering that changes in income tax policies will have an impact on the company's net profit in 2024-2026, we expect net profit to be 1.905/2.116/2.346 billion yuan respectively, up -46.43%/+11.09%/+10.88%, respectively. The corresponding PE valuation is 26.3x/23.7x/21.4x, respectively. In terms of comparable companies, we selected companies in the industry that are also engaged in the Internet video business as comparable targets, including iQiyi, Netflix, and Bilibili. Considering that the company is a scarce state-owned online video platform, the number of users is steadily rising, the Internet video business is developing well, and comprehensively promoting the AIGC layout, it is expected to open up room for performance growth, and the valuation is similar to the average of comparable companies. We recommend continuous attention, initial coverage, and a “gain” rating.

Risk warning: policy risks on the cultural supervisory side; changes in preferential policies for state-owned media companies; macroeconomic pressure; risk of untimely updating of information and data used in research reports; risk of distorted data from third parties.