Event: The company released its 2024 semi-annual report, and 2024H1 achieved revenue of HK$1.181 billion, YoY +17.74%. 2024H1's gross margin increased by 3.53 pct to 42.70% year over year; 2024H1 achieved adjusted net profit of HK$0.064 billion, YoY +10.67%, and adjusted net interest rate of 5.44% (YOY-0.35pct); achieved adjusted EBITDA of 0.196 billion, YoY +8.26%, and adjusted EBITDA rate of 16.63% (YOY-1.46pct).

Revenue from the subscription business grew steadily, and content library penetration increased. 2024H1's subscription revenue was HK$0.545 billion, YoY +16.8%, accounting for 46.2% of total revenue. In the first half of 2024, the company's subscription service capabilities expanded to more copyright categories. The number of customers continued to grow, the content library penetration rate steadily increased, and service coverage of all categories of copyrighted content was achieved. The company has focused on expanding new content fields such as short dramas, e-commerce, music, audiobooks, podcasts, and pictures. In the first half of 2024, the company built the “Chinese Film All Media Publishing and Marketing Platform Project” for leading industry institutions; completed the phased construction of the radio and television system co-construction platform project and entered the trial operation stage; provided customers with full business coverage including short dramas, music and sporting events through deepening cooperation with leading short video platforms; and provided copyright monitoring and protection services covering both inside and outside the site for large-scale short video platforms and large-scale music platforms by providing API service connections.

Value-added businesses are growing rapidly, and social media monetization capabilities are expanding. 2024H1's value-added business revenue was HK$0.635 billion, YoY +18.5%, accounting for 53.8% of total revenue. The company enhances the penetration rate and profitability of customer content by providing rich monetization solutions, and obtains revenue through a split account model. In the first half of 2024, the company continued the trend of contract upgrades with large content parties, achieved large-scale coverage of leading content through increased content library penetration, and brought together high-quality short drama content to form an innovative product system to provide copyright protection and global dissemination of short skits. At the same time, the company has deepened partnerships with major social media platforms and is actively exploring ways to improve the profitability of content on the platform. The number of views of the company's operating content on YouTube's short video platform Shorts has increased dramatically, expanding its social media monetization capabilities.

Service content has gone overseas, and brand influence in the Chinese market has increased. With 2024H1, revenue in China was HK$0.605 billion, up about 8.0% year on year, accounting for about 51.2% of total revenue. Through cooperation with China's largest TV network customers and short video platforms, the company provides copyright protection services for the broadcast and dissemination of the Paris Olympics program.

In terms of overseas content, the company has helped Chinese content companies significantly increase the number of daily active users by constructing a comprehensive media matrix and localized operation strategy. In addition, the copyright protection and trading platform jointly built by the company and major radio and television customers has also entered the trial operation stage.

The number of customers in the US market continues to expand, and cooperation with music brand customers is deepening. 2024H1, the US region's revenue was HK$572 million, up about 30.0% year over year, accounting for about 48.4% of total revenue. The company maintained strong growth in the US market, and the number of clients and active social media assets managed continued to grow. The company has deepened cooperative relationships with large content parties, completed technical tests on the application of watermarking technology on a large global video platform, and promoted commercial deployment. At the same time, the company deepened cooperation with major music brand customers and greatly increased the number of music assets managed.

Profit forecast: The company continues to upgrade products and technology, and expand the service sector from multiple angles. Considering the company's performance and R&D investment plan for the first half of the year, we lowered our profit forecast. We expect the company to achieve revenue of HK$2.51/3.38/4.4 billion in 2024-2026, corresponding to PS 1.4/1.0/0.8x, respectively, and maintain a “buy” rating.

Risk warning: Domestic business growth falls short of expectations, market competition intensifies, and new technology development falls short of expectations.