Main points of investment
Event: 2022H1, the company's total revenue reached 4.061 billion yuan, an increase of 0.7% over the same period last year. Due to the loss of impairment of goodwill, the net loss was about 111 million yuan, the net profit of 2021H1 was 142 million yuan, and the adjusted profit of 2022H1 was 402 million yuan, an increase of 150.8% over the same period last year.
The social business is growing steadily, and the exploration of meta-universe social ecology is accelerated. 2022H1's social product revenue reached 2.8 billion yuan, + 22% year-on-year, and its share of revenue increased by 12pct to 70% year-on-year.
In 2022, the company accelerated the exploration of the new social ecology of meta-universe. Q2 launched the 3D virtual social park product "original World" and the love meta-universe product "Love Planet", and is developing an overseas 3D virtual image social product "The Place" for European and American generation Z users. We believe that the company's entry into meta-universe through the social field has a certain differentiation advantage, to cultivate the minds of users for the company while enriching the product matrix, and promote the long-term development of social business.
The commercialization strategy was adjusted in the first half of the year, and the cash efficiency was continuously optimized. In the first half of the year, taking into account the macro pressure and the company's long-term strategic direction, the company's management adjusted the blueberry monetization strategy to enhance the user experience, resulting in an overall slowdown in future revenue and cash flow forecasts, with a goodwill impairment of 490 million yuan, affecting short-term profits. However, thanks to the optimization of the company's split structure and the increase in revenue from high-margin products under the revenue-sharing business model, gross profit margin increased by 8pct to 42.6% compared with the same period last year. At the same time, the company adopts the strategy of reducing cost and increasing efficiency, which reduces the promotion of domestic business flow, and the sales rate is reduced by 4pct to 21% compared with the same period last year.
Although it affects the number of short-term users, the average monthly income of a single user increased by 44.6% to 22.7 yuan compared with the same period last year, and the company's commercialization ability is fully demonstrated.
In the second half of the year, we will focus on overseas business and look forward to the increase in contribution in 2023. 2022H1's overseas revenue increased 39% year-on-year to 8.7 million yuan, maintaining a good growth trend. The company has launched overseas, including reading products, social products, etc., and initially completed the commercial closed-loop verification. at present, about 6-7 products have been developed simultaneously. In the second half of the year, the company will focus on the development of overseas pan-entertainment tracks, focusing on the field of interactive social interaction, replicating operational experience to other countries and regions, deeply tapping local demand, and achieving breakthroughs in more markets. Considering that the company's overseas business is more in the stage of product promotion and optimization in the second half of the year, we expect that the performance contribution will begin to show after 23 years.
Profit forecast and investment rating: taking into account the impact of the company's strategic adjustment in 2022 on its performance, we downgraded the company's adjusted EPS in 2022-2024 from 0.24 to 0.18, from 0.24 to 0.26, and maintained a "buy" rating corresponding to PE 6.2, 4.3 and 3.6X. (note: unless otherwise specified, the exchange rate of RMB against Hong Kong dollar in this document is HK $1 = 0.8791 RMB on 2022-9-1.)
Risk hints: new business development is not as expected, competition in social racing tracks in overseas markets is fierce, and regulations or policy changes in overseas markets are not as expected.