[Weekly on Stocks] Mega-info Media's Advantages in Digitalization Drive its Further Growth

As the first listed company that runs high-speed rail-based digital media, Mega-info Media (301102.SZ) has attracted great attention since its IPO. Its determination to proceed the IPO against the recent depression at both domestic and international levels especially reflects Mega-info Media's great confidence in its development and prospects.

The pandemic in the past two years has trapped many industries in the plight, and the media advertising industry is no exception. However, Mega-info Media still manages to keep a satisfying performance. According to publicly available data, the company had an annual revenue of RMB 488 million in 2020 with a year-on-year growth of 11.93%, and a net profit of RMB 208 million during the same period with a year-on-year increase of 8.38%; during January to June 2021, it realized a revenue of RMB 243 million with a year-on-year growth of 23.51%, and the net profit for the same period was RMB 83 million. Mega-info Media maintained its gross profit margin at around 60% in recent years, dwarfing other comparable players in the industry during the same period in the average gross profit margin and showing a strong profitability. The existing advantages of Mega-info Media in its high-speed rail digital media network, high-speed rail travel scenarios, digital operation, and customer resource will further reinforce its competitiveness in the market.

The gradual relief of the pandemic will definitely cause a surge in high-speed rail passenger flow and highlight the value of the company's media resources in scenario-based communication. Therefore, the market and business performance will continuously improve and create more momentum for the growth.

An Industry Leader Relying on the Self-built High-speed Rail Digital Media Network

As an embodiment of "China Speed", China's high-speed rail, with its fast development and high quality, is a true "business card of China". China's high-speed rail, since first being put into use in 2008, has become a key travel option for the people as it is "safe, fast, convenient and comfortable". According to CTR High-speed Rail Media Value Research Report, passengers mainly choose high-speed trains for business and travel. Such highly educated, highly-paid and often young passengers are of high-value; and these passengers have to wait in the center waiting rooms at high-speed railway stations for an average time of 36.2 m, the much longer duration comparing to that at bus stations, subway stations and in buildings and elevators helps to realize an average coverage of 7 advertisements for each high-speed railway passenger with an exposure rate of 76%, a great scenario-based advantage. According to the latest Outline of Powerful Nation Railway Advance Planning in the New Era, by 2035, the railway network across China will reach about 200,000 km, including about 70,000 km high-speed railways linking all the cities with a population of more than 500,000. Therefore, the potential for high-speed railway development is still huge.

On the whole, the great development potential, scenario advantages and high-value passengers for high-speed railway is the direct determinant of the high value of high-speed rail media in brand communication, and the characteristics of high-speed rail media of "long-time influence, strong visual attraction, efficient contact, and frequent exposure" further make high-speed rail digital media a must and standard marketing option for many brand owners. Mega-info Media has been focusing on the railway media field since its establishment in 2007. Mega-info Media incisively identifies the infinite potential and chances in high-speed rail digital media in the context of China high-speed rail development. Through close cooperation with China State Railway Group Co., Ltd. and railway bureaus, it focuses on the occupation of key hubs on the railway network and key waiting scenarios. It has built on its own a high-speed rail digital media network covering 97% of the country's provincial-level administrative regions, and has signed contracts with 558 railway passenger stations, with existing business covering 432 railway passenger stations, including 396 h high-speed railway stations and 36 ordinary train stations. Its 5,607 digital media screens could make an annual exposure to over 1 billion passengers.

The huge advantage has attracted many brand owners. According to the prospectus, Mega-info Media has established strategic partnerships with many famous companies engaging in automobile, alcohol, consumer goods, Internet, food and beverage, real estate and many other industries, including industry leaders such as FAW-Volkswagen, Alibaba, Wahaha, Wuliangye, and in the recent year, more than half of its revenue comes from clients that subscribe national advertisement package.

It can be said that, Mega-info Media has become a high-speed rail digital media operator outperforming other domestic counterparts in the breadth and depth of high-speed railway station coverage, the adequacy of digital media resources, and business capabilities. And the future completion and development of "Eight vertical and eight horizontal high-speed railway network" may grant Mega-info Media with more high-speed rail digital media resources and consolidate its leading role in the industry.

Fully tapping the potential of commercial application based on the digital technology

Relying on its role as the industry leader and its first-mover advantage, Mega-info Media relies on new technologies in the digital economy to continue the model innovation and explore new engines for growth. The digitalization and fast response of advertising media become a key part of competitiveness to meet the ever-changing demands of brand owners and consumers. Therefore, digital new media advertisement characterized by precise communication and differentiated customization becomes a major trend. In this regard, Mega-info Media continues to implement its strategic planning in digital media, improves the integration of new digital information and advertising business, actively expands the application scenarios of digital technology, and taps the potential of commercial development.

Engaging early in digital operation, Mega-info Media has accumulated a great number of digital information technologies and rich operational experience. The company has five core technologies for digital operation-the smart collection, release and management system for media information, the smart edition system for contents played on the media, the management system of the played contents, the player equipment operation monitoring system, and the media cabinet temperature control and protection system. The information system platform together with the digital remote management and control enable one-button switching of display contents, better suit the brand owners' requirements on the advertisement of being targeted, differentiated, personalized without compromising the efficient and safe display, and dwarf other competitors in the industry. At present, Mega-info Media's remote and digital management of the high-speed rail digital media network through the information system platform is highly IT-based, and the intensive advertising sites in railway stations make the management convenient and keep the costs in terms of the company's operating personnel and operation at low levels. The future digitalization may further improve the operation efficiency of Mega-info Media.

From the perspective of industry development, the media advertising industry shall take the support for brand owners and the continuous optimization of user experience as a top priority. The key to successful communication lies in the incisive learning of consumers, the full use of advantages brought by cutting-edge media technologies, and the fast occupation of consumers' perception. Taking AR technology for which advertisement is a key commercial application scenario as an example. Technology could realize deep spatial immersion and maximize user experience for outdoor advertisements. In this regard, media based on outdoor scenarios such as high-speed rail, with flexible and unlimited screen display and scenario advantages, are the most suitable for naked-eye 3D and AR advertising.

In the beneficial context of industry market and demand growth, Mega-info Media could take full advantage of its rich industry experience, advanced operation management capabilities and resources in the capital market, rely on its own advantages in media terminals and smart operation, and with the aid of more commercialization of technologies in the future, integrate and optimize outdoor media resources across the country, and use emerging digital information technologies to create a diversified, targeted, custom, and digital all-round smart media solution to fully fulfil the idea of "allowing the unrestrained expression of demands and the permanent inheritance of traditional value." Mega-info Media may experience its fast development stage during the process of fully implementing the digital media strategy, therefore its future performance is highly promising.