This report is read as follows:
22Q4's net loss continues to narrow, and in the future, with the recovery of the advertising environment and the improvement of delivery efficiency, the gradual release of new games and the continued promotion of high ROI content, multi-business is expected to be repaired.
Summary:
The company's earnings can improve for two consecutive quarters and maintain its "overweight" rating. 22Q4's game and advertising revenue is slightly lower than expected. We downgrade the revenue forecast for 2023-2024 to 25629.7 billion yuan (the previous value is 310,37.5 billion yuan), adding 33.3 billion yuan to the 2025 revenue forecast. In view of the better effect of the company's fee control, we raise the 2023-2024 Non-GAAP homing net profit forecast to-3.48 billion million yuan (the previous value is-41,000,000 yuan). Increase the estimated value of Non-GAAP 's net profit of 2.41 billion yuan in 2025, maintaining the "overweight" rating.
Event: the company announced 22Q4 revenue of 6.14 billion yuan (yoy+6%), including 1.15 billion yuan from mobile games (yoy-12%), 1.51 billion yuan from advertising (yoy-5%), 2.35 billion yuan from live broadcast and value-added services (yoy+24%), and 1.13 billion yuan from e-commerce and other services (yoy+13%). The growth rate of live broadcast and value-added services improved significantly compared with the previous month.
The effect of reducing cost and increasing efficiency is beginning to show, and more high ROI content will be promoted in the future. As the economic environment changes, the company regards improving profits as its top priority, and the rate of 22Q4 sales expenses fell 10pct to 20.6% year-on-year, driving the company's adjusted net loss to narrow 20.8% year-on-year to 1.312 billion yuan. In the future, with the gradual recovery of the macroeconomic environment, the company will gradually clean up low ROI content, expand Guoman and other advantageous content categories, and accelerate the commercialization of highly profitable content such as Story-Mode vertical screen video, the company's profitability is expected to continue to enhance.
As the community continues to flourish, DAU will become a more important indicator of user growth. Despite the sharp contraction in sales expenses, the number of users still achieved healthy growth, with 22Q4 DAU reaching 92.8 million (yoy+29%), of which the penetration rate of full members increased by 6.4pct to 59.8% year-on-year, and the payment rate decreased slightly to 8.6% from the same period last year. In terms of user activity, the average daily use time of a single user increased by 17% year-on-year to 96 minutes to a record high, the average daily video playback of the platform increased by 77% to 3.9 billion times compared with the same period last year, and the average monthly interaction of the platform increased by 35% to 13.6 billion times compared with the same period last year. The community atmosphere of "create-attract-inspire" continues to be recognized by users, and the efficiency of business transformation is expected to be improved.
Risk tips: content quality reduces risk, user preferences and market trend change risk.