With Internet advertising performance continuing to fall short of expectations, 300413.SZ began to look for incremental results, the first step being to acquire the animation business held by the controlling shareholder.

Recently, Mango Supermedia announced that it plans to buy a 100% stake in Hunan Golden Eagle Cartoon Media Co., Ltd. (hereinafter referred to as "Golden Eagle Cartoon"), a wholly-owned subsidiary of controlling shareholder Mango Media Co., Ltd. (hereinafter referred to as "Mango Media") at a price of 835 million yuan. After the completion of the transaction, Golden Eagle Cartoon will become a wholly owned subsidiary of Mango Supermedia.

Golden Eagle Cartoon is a young children's content production company under Hunan Radio and Television, which has its own IP, such as Niu Naitang, wheat card and so on. Mango supermedia will take the Golden Eagle cartoon into the bag, which means that businesses such as animation IP operation will be added within the framework of its business.

It is worth mentioning that for this acquisition, Mango Supermedia and the controlling shareholder have set a performance commitment, and the latter expects the total net profit of Golden Eagle cartoon to be no less than 160 million yuan in the next three years, and cash compensation will be given to listed companies if they fail to meet the standards.

In the past few years, when long video platforms such as "Aiyou Teng" spent a lot of money to compete for exclusive copyright, mango supermedia relied on popular variety shows such as "Lang Jie" alone. In 2021, it recorded a double increase in revenue and net profit, earning 2.1 billion yuan, while most other video platforms lost money in the same period.

However, in 2022, the performance of Mango Supermedia showed a certain decline, with the core business advertising business under pressure, down 26.77% from the same period last year; the "New Media Interactive Entertainment Video content production and Operation" business, which includes variety show production, also recorded a continuous decline.

It is not difficult to understand that, after all, in the film and television industry, which is doing traffic business and making money from advertising, "popular style" can only solve the problem for a moment. Netflix Inc is caught in a content supply-side problem, and even if he has a lot of popular IP like Marvel, it is difficult to ensure Walt Disney Company's performance will last forever.

Accordingly, extending the tentacles upstream and downstream as much as possible, covering more business means calming risks while bringing performance increments. Up to now, Mango supermedia has successively set foot in areas such as live streaming and games, and content e-commerce has now become its second-largest business in revenue.

On the day of the announcement, mango supermedia rose more than 4%. As of July 28, it closed up 12.46% for the year, closing at 33.63 yuan per share.

Three-year commitment of 160 million yuan

The controlling shareholder of Mango Supermedia is confident about the asset quality of Golden Eagle Cartoon.

In the past two years, Golden Eagle Cartoon recorded revenue of 452 million yuan and 273 million yuan respectively, and net profit of 60.9195 million yuan and 46.9905 million yuan respectively, both declining to a certain extent.

It is worth noting that the total debt of Golden Eagle Cartoon surged 48.91% to 570 million yuan compared with the same period last year, and the debt ratio increased to 74.5%. The reason is not explained in the announcement.

All the money used for the transaction will come from the own funds of Mango Supermedia. As of the first quarter of 2023, the balance of cash and cash equivalents at the end of mango supermedia period reached 9.06 billion yuan, with an asset-liability ratio of 34.48%. According to the trading price of 835 million yuan and the net profit of 46.9905 million yuan, the valuation of Golden Eagle cartoon is less than 18 times. For comparison, Alpha Animation & Culture (002292.SZ), who is also engaged in animation IP operation, has a dynamic price-to-earnings ratio of more than 200 times.

Or due to the fluctuation of the performance of Golden Eagle Cartoon in 2022, the controlling shareholder of Mango Supermedia made a performance commitment that the net profit of Golden Eagle Cartoon from 2023 to 2025 was not less than 46.2538 million yuan, 54.1425 million yuan and 59.6947 million yuan respectively, totaling 160 million yuan, corresponding to year-on-year growth rates of-0.02%, 17.1% and 10.3%, respectively.

It is mentioned in the performance agreement that if the performance commitment is not up to standard, Mango Media will give Mango supermedium cash compensation.

Mango Supermedia did not disclose related transactions with Golden Eagle Cartoon, but the amount of related transactions was included because the latter was previously a wholly owned subsidiary of the controlling shareholder. The announcement shows that from the beginning of 2023 to July 25, excluding the acquisition of Golden Eagle cartoon, a related party transaction of 1.19 billion yuan has taken place between Mango Supermedia and its controlling shareholders.

Referring to the Mango Supermedia 2022 Annual report, the related party transactions between Mango Supermedia and its controlling shareholders include operator value-added shares, brand licenses and program royalties. And in the Golden Eagle cartoon into the body, mango supermedia in the procurement of animation content, or will have the corresponding "cost reduction" effect.

A brokerage analyst in the media industry in southern China told ID:TradeWind that "Mango Media has always had a cost advantage in content procurement in the past."

Multiple bets seeking increment

The mango supermedia loaded the Golden Eagle cartoon into the listed company, which seems to be a new attempt to bet on the new track under the internal and external troubles.

In the past, relying on the supply of exclusive popular variety shows and the first start-up advantages of talent shows such as "Super Girl" and "Happy Boys", business models for talent shows, artist operation and variety shows were built.

The rich content supply enabled Mango Supermedia to become a headline video platform, and when Aiyouteng fought for copyright, it became the only profitable long-term video platform in 2021.

However, with the impact of the epidemic, offline activities have been restricted, the talent show industry has been suspended, and there has been a gap in the supply of artists. Mango supermedia's "production of new media interactive entertainment content", which includes artist agents, has been hit hard, recording three consecutive years of decline since 2020.

And the external environment has also affected the expectations of advertisers and began to reduce the intensity of advertising. Although the number of monthly active users of Mango supermedia rose against the trend in 2022, the core advertising business fell for the first time in nearly three years, down 26.77% from a year earlier to 3.994 billion yuan.

So in 2020. Mango supermedia began to test the waters of e-commerce business, online Xiaomang e-commerce, take the content e-commerce path, the combination of long video and e-commerce. In 2022, the annual GMV of Xiaomang e-commerce is seven times that of the previous year, and the peak DAU is 2.07 million. Content e-commerce contributes 2.14 billion yuan in annual revenue, second only to the mango TV Internet video business, which includes advertising and member revenue.

In addition, in June this year, Mango Supermedia launched a game of the same name adapted from Variety IP's Life of yearning, which is currently ranked 58th on the free list of iOS simulation games, according to Qimai.

The inclusion of Golden Eagle cartoon in mango hypermedia not only means richer content supply, but also means one more path to realize traffic, which may bring more incremental performance on the IP operating side.

According to public information, the main business of Golden Eagle cartoon includes content production, offline activities and park operation, as well as derivatives development and sales.

With reference to Alpha Animation & Culture's development path, which has many well-known IP such as Pleasant Goat and Grey Wolf and Armored Warrior, it extends from film and television content products to maternal and child products, toys and other categories. In 2022, Alpha Animation & Culture's sales of toys and baby products accounted for more than 80% of the revenue, of which baby products contributed nearly 1.2 billion yuan in revenue, accounting for more than 40%.

Zhang Shule, an expert at Zhongjing Media think tank, told ID:TradeWind01 that peripheral derivatives such as gamification, toys (dolls, cards, etc.) and theme parks are the main ways to realize animation IP in China.

However, at present, most of the people in China are still in the preliminary stage of exploration, not to mention the real leaders. If you want to say that there are certain achievements, many years ago, Audi Shuangdrill used the animation "four-wheel drive boy" to drive the hot sale of four-wheel drive toys, as well as the card craze caused by the current animation "Douluo mainland" and exploring more cases of related peripheral derivatives. It can barely serve as a representative. " Zhang Shule added.