The rapid development of the AR/VR industry is driving high performance. In 2022, the company achieved revenue of 1,066 million yuan (yoy +79.1%); achieved net profit of 237 million yuan (yoy +237.2%). By business, the AR/VR marketing service business achieved revenue of 682 million yuan (yoy +81.2%); the AR/VR content business achieved revenue of 336 million yuan (yoy +108.3%); and the AR/VR SaaS business achieved revenue of 44 million yuan (yoy +112.3%). According to iResearch's data, China's VR/AR content and service market size was 21.7 billion yuan in 2021. It is predicted that it will reach 130.2 billion yuan in 2026, with a compound growth rate of 38.2% in 2022-26. The company ranked first in the AR/VR market in China, with a market share of 2.6% in 2021. It is expected to benefit from the rapid development of the industry and maintain a high level of performance.
User recognition has increased, and business performance has been impressive. The company was previously engaged in games and related businesses, and its competitiveness gradually became prominent through the accumulation of R&D technology, user data and media resources in game development. The number of marketing service business customers and average consumption, which is the main source of revenue, both increased, and the renewal rate increased to 63%; the number of content business projects rose to 149 (yoy +56.8%); and the number of registered and paid subscribers in the SaaS business basically doubled compared to 2021.
Gross margin improved, and R&D investment increased. The company achieved a comprehensive gross profit margin of 35.1% (yoy +5.6%) in 2022, mainly due to orderly business expansion. By business, the marketing business achieved a gross profit margin of 22.8% (yoy +1.1%); the content business achieved a gross profit margin of 55.9% (yoy +9.7%); and AR/VR SaaS achieved a gross profit margin of 68.3% (yoy +13.6%). In 2022, the company's sales expense ratio, management expense ratio, and R&D expense ratio were 1.28%/3.11%/4.55% respectively. Among them, the sales expense ratio and management expense ratio improved slightly, and the R&D expense ratio increased slightly by 0.9%. The company's R&D focuses on technology and content development. The current R&D team consists of 56 people, accounting for about 46.7% of employees, and R&D investment continues to increase.
[Investment advice]
The company is an industry-leading AR/VR content service provider. Benefiting from the rapid development of AR/VR technology and increased scene penetration rate, its performance is expected to maintain high growth. We expect the company to achieve operating income of 18.6/28.2/4.14 billion yuan in 2023-25, net profit of 348/551/871 million yuan, EPS of 0.2/0.3/0.5 yuan/share, and the corresponding PE is 12/8/5 times, respectively, giving the company an “increase in holdings” rating.
[Risk Reminder]
Competition increases risk
The development of the industry fell short of expectations
Policy, legal and regulatory risks