Events:
The company announced its 2021 annual report with total operating income of HK $686 million (YoY+101.80%) and net profit of-HK $23 million (YoY-127.92%), deducting non-home net profit of-HK $23 million (YoY+60.38%).
Main points of investment:
Overall performance: revenue in 2021 was higher than expected; on products, content protection and content realization business maintained a high growth trend; regionally, Chinese mainland business grew more than ten times faster, realizing the business model of computing power output, and continued to expand its business in the Chinese market; net profit was higher than expected; gross profit margin increased, and the expense rate decreased during the period, mainly affected by the scale effect of business expansion. The increase in R & D expenditure rate is mainly affected by the increase in R & D activities and the substantial increase in R & D personnel.
Content protection: in 2021, the content protection business generated revenue of HK $177 million (YoY+130.52%, accounted for 25.74% of revenue) The high revenue growth mainly benefits from domestic business expansion, including the computing power output business with Ant chain as the main platform, which has directly and indirectly served many domestic content party customers. It has also signed a platform for copyright protection and distribution with China Mobile Limited Migu Culture, China Telecom Corporation Tianyi Video and Zhejiang Wen Exchange. With the frequent emergence of domestic copyright-related policies and the continuous improvement of the copyright environment, the computing power output model suitable for domestic development will further meet more and more content protection needs. In addition, DTC copyright protection business is also gradually landing stage, with the rapid development of overseas DTC industry, Walt Disney Company, Netflix Inc, Paramount and other streaming media platform copyright protection space will be gradually released.
Content realization: in 2021, the content realization business realized revenue of 481 million Hong Kong dollars (YoY+101.87%, accounted for 70.04% of revenue); the high revenue growth mainly benefited from the continued growth of content realization income from YouTube. In 2021, YouTube advertising revenue reached US $28.845 billion, an increase of 45.89% over the same period last year; the penetration rate of Fubo management content on YouTube platform reached 0.9%, an increase of 0.2 pct over the same period last year; Fubo continued to infiltrate the YouTube market; Fubo received a net share of HK $226 million directly from YouTube advertising revenue and HK $210 million indirectly from major customer A. With the continuous growth of YouTube advertising revenue, the improvement of Fubo penetration and the continuous integration of VDNA technology, it will help overseas content to realize business revenue and gross profit. With the gradual improvement of the domestic copyright environment, Fubo's acquisition of particle culture will help to achieve the landing of the domestic content cash model and open the stage of rapid growth of the domestic content cash business.
Profit forecast and investment rating: we expect 2022-2024 revenue of HK $13.94,22.53 and HK $3.101 billion, respectively, and net profit of HK $0.57,0.60 and HK $135 million, respectively. Due to the high growth of the company's business, we maintain our "buy" rating.
Risk hints: 1) the risk of uncertainty in Sino-US relations; 2) the continuing risk of COVID-19 epidemic; 3) the promotion of copyright protection policy is not as expected; 4) the development of DTC is not as expected; 5) the domestic business progress is not as expected; 6) the market competition is intensified; 7) emerging technology breakthroughs; 8) acquisition integration is not as expected.