Core ideas:
The company disclosed the 22H1 results announcement. 22H1 income 4.087 billion yuan (YoY-5.9%), Non-IFRS homing net profit 666 million yuan (YoY+0.2%); sales and management expenses combined year-on-year-4.8pct, reducing costs and efficiency measures are promoting profits.
Revenue from both online and copyright operations declined, while MAU and writer ecology continued to grow. Online business: 22H1 income 2.307 billion yuan (YoY-9.2%), gross profit margin 50.3% (YoY+2.9pct), MAU 265 million people (YoY+13.8%, month-on-month flat). Paid reading revenue is-7.2% compared with the same period last year, with an average monthly payment of 8.1 million users (YoY-12.9%, unchanged), a monthly ARPU of 38.8 yuan (YoY+6.6%), and a free reading income of about 14 million DAU in June 22 compared with the same month last year, with a decrease of 1 million compared with the previous year. Third-party platform revenue declined significantly, mainly due to the suspension of cooperation with some third-party channels. Copyright operation and others: Xinli 22H1 earned 967 million yuan, returned home net profit 209 million yuan, released 2 films + 4 dramas, including "Killer" (box office reached 2.6 billion yuan), "Longxi from the Wind", "the World" and so on; 22H1 revenue from independent copyright operation was 770 million yuan, a year-on-year decline of-28.7%, mainly due to the decline in revenue from proprietary games, while revenue from IP licensing, film and television series, and animation increased steadily.
Profit forecast and investment advice: 22H2 online business revenue is expected to be flat month-on-month, including paid reading month-on-month growth, advertising business is still under pressure, third-party business is expected to decline month-on-month. Xinli 22H2 is expected to broadcast 4 TV dramas and 2 to 3 online movies; revenue from independent copyright operator 22H2 is expected to pick up month-on-month with the delivery of the project. It is estimated that the net profit of NonGAAP in 2223 is 1.427 billion yuan and 1.638 billion yuan respectively, and the current stock price is 18 times and 15 times corresponding to PE. With reference to the comparable company valuation, China Literature, as the ecological leader of IP, gave a 22-year valuation of 25 times PE, corresponding to a reasonable value of HK $41.23 per share. Maintain a "buy" rating.
Risk hint. The delay of Xinli key repertoire leads to the fluctuation of Xinli's performance; the growth of paying users is weak, and the growth of advertising is not up to expectation; the uncertainty of policy change.