Events:
The company announced that 2022Q4 reported a revenue of 6.142 billion yuan (YoY+6%,QoQ+6%), an operating loss of 2.327 billion yuan (YoY expanded 16% by 26%), and a net profit loss of 1.495 billion yuan (YoY narrowed by 28% QoQ by 13%). The net profit and loss of NON-GAAP was 1.312 billion yuan (YoY narrowed 21% by 26%) and diluted loss per share was 3.31 yuan after adjustment (YoY narrowed 21.56% by 25.78%).
Our view:
1. Operation: the number of monthly active users of 2022Q4 reaches 326 million, and the average daily use time of users is 96 minutes, maintaining a double-digit growth. The platform continues to provide users with high-quality video content with rich categories and multi-scene coverage, promoting user stickiness and community activity, monthly active content contributions still maintain high-speed growth compared with the same period last year, Story-Mode brings new traffic to the platform, and the improvement of diversified content ecology and commercialization level promotes the main cash realization ability of UP, and further optimizes community content quality.
2. Main financial indicators: revenue and profit are in line with expectations, gross profit margin is optimized, sales expense rate is 10pct lower than the same period last year, 1pct is optimized, and adjusted net loss is narrowed compared with the same period last year.
3. Mobile game business: 2022Q4 revenue fell 11.5% to 1.15 billion yuan compared with the same period last year, mainly due to the lack of new games launched this quarter. 2023H1 will launch two self-developed games, "Sluder" and "Elushir: star Dawn", and release six agent games at home and abroad, and the game business is expected to improve in Q2.
4. Value-added services: 2022Q4 revenue increased by 24% to 2.35 billion yuan compared with the same period last year, further promoting the integrated operation of live broadcasting and video ecology, encouraging more UP masters to become anchors and driving the transformation of paying users. The average monthly paid users of live broadcasting business increased by more than 40% compared with the same period last year. The ecology of high-quality OGV content pushed the number of large members to 21.4 million.
5. Advertising and e-commerce business: 2022Q4 advertising revenue decreased by 5% compared with the same period last year, mainly affected by the adverse macro environment. Story-Mode vertical screen video promotion effect advertising revenue increased by 50% compared with the same period last year; e-commerce revenue increased by more than 100% year-on-year during the Singles' Day period, and e-commerce and other businesses increased by 13% to 1.13 billion yuan.
Earnings forecast and investment rating take into account the impact of the game product cycle and some low-margin business adjustments, we slightly downgrade the 2023 revenue forecast, the company is expected to FY2023-2025 revenue of 319,000,000 million, NON-GAAP home net profit of-35 gamma 5 / 1 billion yuan; corresponding SPS is 62-78-93 yuan, corresponding to PS respectively is 2.4x/1.9x/1.6x.
The company's active users continue to grow, and the participation and retention rate are steadily upward. We believe that there is a great potential for continuous expansion and accelerated realization of user traffic. We give it a target MAU valuation of RMB 300 for 2023, a target market value of RMB 76.4 billion for PS 3X, a market value of RMB 82.7 billion for SOPT, a compromise of RMB 90.3 billion for Target Price in 2023, and a "buy" rating.
Risk indicates that macroeconomic growth is less than expected risk, game version number acquisition, game research and development and launch are less than expected risk, competition aggravates risk, user loss risk, Internet valuation adjustment risk, policy regulatory risk and so on.