Revenue and profit declined, and content investment continued to increase. 1) In the first 3 quarters of 24 years, the company achieved operating income of 10.278 billion yuan and net profit of 1.444 billion yuan, a year-on-year decrease of 0.85% and -18.96%, corresponding to fully diluted EPS of 0.77 yuan; 2) In the Q3 single quarter, the company achieved revenue of 3.318 billion yuan and net profit to mother 0.38 billion yuan, down 7.14% and 27.41% year-on-year respectively; the decline in revenue and performance was mainly due to the decline in operator business affected by television industry governance. On the other hand, the income tax exemption policy expired (income tax expenses for the first three quarters were 0.277 billion yuan, compared to -1.74 million yuan in the same period last year); 3) The net cash flow from the company's operating activities in the first three quarters was -0.325 billion yuan (1.091 billion yuan in the same period last year), mainly due to increased investment in head content reserves, which led to a decline in net operating cash flow.

The membership business is performing well, and we are concerned about the possibility of recovering the advertising business to the top of the mountain. 1) Mango TV has more than 70 million active members, ranking among the top in the domestic video industry; in terms of revenue performance, the first half of the year's membership revenue was 2.486 billion yuan, an increase of 27% over the previous year, thanks to high-quality content and member benefit systems: popular variety shows represented by “Singer 2024” and “Ride the Wind 2024” and popular series represented by “With Phoenix” and “Happy Parent Group” strongly drove the rapid growth of membership; innovated the membership rights system, launched more than 300 member benefits, steadily increased the PPU value, and the overall performance was steady. ; 2) The advertising business achieved revenue of 1.721 billion yuan in the first half of the year, down 4% year on year, and is expected to continue the performance trend in the first half of the year; along with subsequent macroeconomic recovery, the company relies on stable content advantages and platform traffic advantages, and is expected to accelerate the pace of recovery of the advertising business through innovative marketing strategies and optimization of AI algorithms.

The content ecosystem continues to improve, and variety shows and series continue to perform brilliantly. 1) Mango TV launched a total of 31 seasonal variety shows in the third quarter, ranking at the top of major long-form video platforms; among them, “Hello, Saturday 2024,” “Chinese Restaurant 8,” and “Crossing Thorns 4” ranked in the top three in the Taiwan and Internet Roundup lists; Q4 “Goodbye Lover 4” performed well, while “Continuing Sound: Hong Kong Music Season 2”, “Women's Mystery Club 2” and “Time Concert 4” are expected to drive Q4 variety content to continue to improve; 2) On the Q side, series, etc. 3 “You're More Beautiful Than Starlight” and “Private Romance” went live; “Splendid Tranquil” and “The City of Sunshine” launched “Alley People” ” It is expected that series such as “The Lucky Family” will be released one after another and will continue to drive the popularity of Q4 series.

Risk warning: Membership growth falls short of expectations; technology development falls short of expectations; new business development falls short of expectations, etc.

Investment advice: Maintain profit forecasts and maintain a “better than the market” rating. We expect net profit to be 1.96/2.19/2.44 billion yuan for 24/25/26, corresponding EPS of 1.05/1.17/1.30 yuan, PE = 23/21/19x during the same period. We continue to be optimistic about the company's content and platform operation advantages and growth potential in the AIGC era, and maintain a “superior to market” rating.