Incident: The company released its 2021 semi-annual report. (1) 2021H1 achieved operating income of 93 billion yuan, an increase of 79.74% over the previous year, net profit of 200 million yuan, an increase of 344.28% over the previous year, net profit of 99 million yuan after deducting non-return mother's net profit of 199 million yuan, an increase of 375.96% over the previous year. (2) 2021Q2 achieved operating income of 413 million yuan, an increase of 46.29% over the previous year, net profit of 49.71 million yuan, an increase of 60.26% over the previous year, after deducting net profit of 48.05 million yuan from non-return mothers, an increase of 65.47 percent over the previous year.
The internet marketing business continues to grow rapidly. 1) The company's Internet marketing business was carried out through the subsidiary Li'an Media. The 2021H1 business achieved revenue of 80 billion yuan, an increase of 111.9% over the previous year, accounting for 86.0% of revenue, an increase of 8pct over the end of 2020 and an increase of 13 pct over 2020H1. 2) The number of 2021/H1 customers was 24, a significant increase from 16 in the same period last year. The industry sectors where customers are located mainly include games (advertising revenue accounts for 49.7% of revenue), e-commerce (advertising revenue accounts for 19.0% of revenue), and application (advertising revenue accounts for 14.0% of revenue). 3) In the first half of 2021, App Growing detected a total of 8900w+ ads across the network. In March, the advertising market returned to pre-Spring Festival levels, and the number of ads placed in the first half of the year peaked in April. A total of 1,600w+ ads were monitored that month. Market volume has remained stable. It is expected that the Internet marketing business will continue to grow in the future. 4) 2021H1, Yijia Jingshi, the operator responsible for building advertising, achieved revenue of 114 million yuan and net profit of 33.51 million yuan (up 91.6% over the same period last year).
Actively respond to policy changes and accelerate overseas business. 1) Recently, including Apple's new IDFA (advertising identifier) policy and national regulations on algorithm promotion, have all put forward new requirements for the development of online advertising business. The company has responded positively and increased its investment in algorithm development and standardized operation. It is expected that the impact of the new technology upgrading policy will gradually be digested later; 2) The company has stepped up production capacity expansion to increase product richness, while actively expanding other monetization models based on Second Ring Road traffic; 3) Overseas business cooperation with Kuaishou has begun to gradually implement, and the game “Ludo Master” is expected to perform well in Indonesia. In the future, overseas business will provide the company with new profit growth points.
Investment advice: Relying on the monetization dividend of external traffic from short video stations, the company has built a traffic operation platform, and long-term development can be expected. However, a series of recent industry-specific policy changes are expected to have a certain impact on the company's Internet marketing business. Therefore, the company's profit forecast was lowered. The net profit forecast for 2021-2023 is expected to be 501/785/1,103 billion yuan respectively; a year-on-year increase of 66.2%/56.7%/40.5%, corresponding to 2021/2022/2023 8.4/5.4/3.8XPE, maintaining the “buy” rating.
Risk warning: Higher goodwill balance risk, increased risk of advertising business competition, and game policy risk.