3Q22 performance is lower than we expected.
The company announced 3Q22 results: revenue was 1.596 billion yuan, down 15.4% from the same period last year; net profit from home was 16.49 million yuan, down 89.9% from the same period last year; net profit from non-return was 2.03 million yuan, down 98% from the same period last year, and the performance was lower than expected. We believe that the pressure on the performance in the third quarter is mainly affected by the epidemic repeatedly, the development of offline travel business is faced with certain resistance, and the operation is also affected.
Trend of development
Offline business is still under pressure due to the repeated effects of the epidemic, dragging down revenue performance in a single quarter. The third quarter is usually the peak season for the company's offline travel business, and we expect 3Q22 to be continuously affected by repeated outbreaks, resulting in a significant year-on-year decline in the company's offline 3Q22 business revenue, while venues such as the Shanghai International Conference Center and Mercedes-Benz Cultural Center also have limited revenue contributions. However, we believe that the traditional radio and television network business is still subject to fierce external competition, and the operation may also be under relative pressure. Combined with the above, the company's 3Q22 revenue has declined to a certain extent compared with the same period last year. In the short term, we believe that the repeated impact of the potential epidemic still brings some uncertainty to the company's business, especially the offline travel business.
The gross profit margin is basically the same as the same period last year, and the operating expenses are controlled to a certain extent. In terms of gross profit margin, 3Q22 gross profit margin is 30.5%, which is basically the same as the same period last year, and the month-on-month increase in 3.9ppt. In terms of operating expenses, the 3Q22 sales expense rate, management expense rate and R & D expense rate are 10.9%, 16.1%, 3.7%, respectively, which is higher than the same period last year. In absolute terms, operating expenses have decreased to a certain extent. We believe that under the current business pressure, the company has certain control over costs.
Pay attention to the development potential of radio and television media integration, waiting for business transformation and upgrading. We believe that in the medium to long term, the development tone of the company's radio and television media integration is expected to continue, but the ability of streaming media business to integrate products, content, channels, shopping and other online core resources still needs to be further improved. Radio and television network business is still in the early exploratory stage of transformation, it is recommended to pay attention to the synergy potential of the company's online and offline business, and promote further upgrading of the business.
Profit forecast and valuation
As offline business was greatly affected by the epidemic, we reduced net profits by 78.6% and 31.8% to 351 million yuan and 1.112 billion yuan in 2022 and 2023 respectively. The current share price corresponds to 18.4 times the 2023 PCME.
To maintain the neutral rating, due to the earnings forecast downgrade, and considering that 2022 was repeatedly affected by the epidemic, we switched to the 2023 Pamp E valuation, and we lowered the target price by 33.4% to 5 yuan, corresponding to 15 times 2023 Pmax E. there is 16.4% downside compared to the current stock price.
Risk
The impact of the epidemic was smaller than expected, competition eased, and new business advanced more than expected.
