Summary of Damai Entertainment Holdings Conference Call Company Overview - **Company**: Damai Entertainment Holdings - **Industry**: Entertainment and IP Merchandising Key Financial Highlights - **H1 FY26 Revenue**: Rmb4.05 billion, a 33% YoY increase, surpassing UBS-e/Visible Alpha consensus by 7%/6% [2][10] - **Gross Profit Margin (GPM)**: Decreased by 7.5 percentage points YoY to 35.7% [2][10] - **Adjusted EBITA/Net Profit**: Rmb550 million/Rmb542 million, beating consensus by 6%/11% [2][10] Segment Performance 1. **IP Merchandising** - **Revenue Growth**: Over 100% YoY, with profit doubling in H1 [3] - **Segment Margin**: Fell by 8.6 percentage points YoY to 20.2% due to one-off losses and investment in IP operations [3][10] - **Future Plans**: Management aims to scale the to-C retail business, indicating potential for further growth [3][11] 2. **Live Entertainment** - **Revenue Growth**: Increased by 12.5% YoY to Rmb1.3 billion, exceeding UBS-e/consensus by 9%/10% [3] - **Content Revenue Growth**: Over 50% YoY [3] - **Strategic Focus**: Plans to increase participation in sports event investment and operations, with a medium to long-term focus on overseas expansion [3][12] 3. **Film Segment** - **Revenue Decline**: Decreased by 12.5% YoY, but segment margin improved to 8.9% from 2.7% in FY25 [3][13] - **Investment Strategy**: Focus on medium to low-budget, high-return projects, leveraging AI to reduce production costs [13] Market Outlook and Strategy - **Overseas Expansion**: Management emphasizes a strategic focus on overseas markets, citing opportunities for domestic artists and increasing demand among domestic consumers [12] - **Asset-Light Model**: The company plans to maintain an asset-light retail business model while expanding its physical and online store presence [11] Valuation and Stock Performance - **Price Target**: Lowered from HK$1.29 to HK$1.23, maintaining a Buy rating [4][5] - **Current Trading**: Trading at 20x FY27E PE, below peers despite a projected 28% EPS CAGR from FY26-28E [14] - **Market Capitalization**: HK$27.8 billion (US$3.58 billion) [7] Important Metrics - **Revenue Projections**: Expected to grow to Rmb7.885 billion in FY26E and Rmb9.149 billion in FY27E [6] - **Net Debt**: Projected to increase from Rmb2.701 billion in FY25 to Rmb4.038 billion in FY27E [6] Conclusion - Despite margin contraction in IP merchandising, Damai Entertainment Holdings shows strong underlying business momentum and growth potential in IP commercialization and overseas expansion. The company is well-positioned to capitalize on growth opportunities in the entertainment sector, particularly in IP merchandising and live content.