Key takeaway

Revenue came under short-term pressure in 2Q26, but the shift between old and new growth drivers continued; operating efficiency improved, and profitability remained resilient excluding investment income. 1) Revenue was RMB5.99bn in 1H26, down 1.98% YoY, with 2Q26 revenue down 5.5% YoY. The decline was larger than that in 1H26, likely because the food delivery subsidy battle had already begun in 2Q25 and generated incremental advertising demand, while incremental demand from AI applications in 2Q26 was insufficient to offset reduced spending by food delivery platforms; daily consumer goods also remained under pressure. 2) Profitability: Net profit excluding non-recurring items fell 17.06% YoY, and the net margin excluding non-recurring items was 39.80%, down 5.56 pcts YoY. This was mainly due to lower investment income following the divestment of Shuhe Technology, with investment income as a percentage of revenue down 5.29 pcts YoY. Operating efficiency improved, with the gross margin up 0.81 pcts YoY in 2Q26, the selling expense ratio down 1.42 pcts YoY, and the administrative expense ratio largely unchanged. Outlook: Monitor the sustainability of advertising spending by AI applications, whether consumption stabilizes, and the progress of the acquisition of Xinchao Media. We believe there is no need to be overly concerned about earnings stability. The company is a resilient leader in elevator media and operates an important offline channel for building brand awareness, while its dividend yield of approximately 6% provides a valuation cushion.

Revenue: The internet sector continued to contribute incremental revenue, while daily consumer goods remained under pressure. Revenue was RMB3.076bn in 2Q26, down 5.5% YoY, with YoY growth slowing by 7.5 pcts QoQ. Revenue came under pressure mainly because incremental demand from AI applications did not fully offset the decline in advertising spending by consumer goods companies. By business, revenue from the internet sector reached RMB1.655bn in 1H26, up 68.0% YoY, and its revenue contribution rose to 27.6%; revenue from daily consumer goods was RMB2.899bn, down 14.7% YoY, mainly due to weak consumption.

Profitability: Operating efficiency improved, while the decline in net profit excluding non-recurring items in 2Q26 was mainly due to the impact of the Shuhe Technology divestment on investment income. In 2Q26, net profit excluding non-recurring items was RMB1.224bn, down 17.06% YoY, and the net margin excluding non-recurring items was 39.80%, down 5.56 pcts YoY. Investment income as a percentage of revenue fell 5.29 pcts YoY, mainly because Shuhe Technology contributed investment income in the same period last year. Operationally, efficiency improved, and the overall gross margin reached 72.24% in 2Q26, up 0.81 pcts YoY; the selling expense ratio continued to improve, falling 1.4 pcts YoY to 17.8%; the administrative and R&D expense ratios were largely unchanged.

Proposed interim cash dividend. The company proposes a cash dividend of RMB0.05 per share, totaling RMB722mn and representing approximately 23.1% of net profit attributable to shareholders of the parent company. The rolling cash dividend over the past year was RMB0.29 per share, corresponding to a dividend yield of 5.9%.

Event

On August 17, the company released its 2026 interim report. In 1H26, operating revenue was RMB5.991bn, down 1.98% YoY; net profit attributable to shareholders of the parent company was RMB3.128bn, up 17.39% YoY; and net profit attributable to shareholders of the parent company excluding non-recurring gains and losses was RMB2.291bn, down 7.06% YoY. In 2Q26, revenue was RMB3.076bn, down 5.5% YoY; net profit attributable to shareholders of the parent company was RMB1.338bn, down 12.5% YoY; and net profit attributable to shareholders of the parent company excluding non-recurring gains and losses was RMB1.224bn, down 17.1% YoY.

Risks

Risks include weaker-than-expected macroeconomic growth and stabilization of consumption; weaker-thanexpected advertising spending by emerging industries such as AI applications; weaker-than-expected advertising spending by the real estate and telecommunications industries; intensified competition in the advertising market, as online media, other out-of-home media, and emerging marketing channels could divert advertisers’ budgets; potential pressure on the core business if the Company’s customer mix adjustment and expansion into new industries fall short of expectations; weaker-than-expected overseas expansion; weakerthan- expected acquisition of Xinchao Media, as the transaction is currently under suspended review and requires supplementary financial information and subsequent review, approval, or registration procedures, with uncertainties surrounding the resumption of the review, closing progress, and integration results; goodwill impairment; credit impairment; earnings forecasts falling short of expectations; regulatory risks; and weakerthan- expected performance of investees.