Event: In 2022, the company's total revenue reached 6.319 billion yuan, or -31.1% year on year. Due to loss of impairment of goodwill, Guimu's net loss was 166 million yuan; adjusted net profit was 388 million yuan, -20% year on year.
Reducing costs and increasing efficiency has yielded results, and gross margin has increased. In '22, the company continued to optimize the “Inke Live” platform ecosystem, making it more refined in terms of anchor incubation and growth systems. At the same time, the user experience was enhanced, the interactive social attributes of the platform were enhanced, and the profit margin of the live streaming business increased steadily. Benefiting from refined operating strategies and product structure optimization, the company's gross margin increased to 40.3% from 36.0% in 2021; sales expenses were 1,381 million yuan, a year-on-year decrease of 37.6%, and the expense ratio fell from 24.1% in 2021 to 21.9% in 2022. Excluding the impact of commercial impairment, the company's adjusted net interest rate increased 1.1 pct to 6.2% year-on-year in '22.
The social networking business is developing steadily, with a multi-directional layout to find potential growth points. In 2022, the company increased user retention through high-quality content and gameplay innovation, optimized traffic distribution algorithms, and steadily increased the social business user retention rate and social business profit margin. In '22, the company continued to deploy in multiple directions, signed contracts to “project” digital people, experimented with new business formats such as virtual live streaming, and continued to innovate in terms of gameplay and content. In the future, the company will continue to increase investment in R&D and enhance its comprehensive R&D capabilities.
Continuing to focus on overseas business in '23, we look forward to increasing contributions. The company has launched overseas, including reading products, social products, etc., and has initially completed the verification of a closed loop of business. Overseas revenue showed a rapid growth trend in '22. In '23, the company will continue to focus on the development of overseas pan-entertainment tracks, focusing on the field of interactive social networking, promoting and replicating operating experience to other countries and regions, digging deeper into local demand, and achieving breakthroughs in more markets.
Profit forecasts and investment ratings: In 2023, with macroeconomic recovery, users' willingness to pay is expected to increase. At the same time, the company will also speed up the layout and promotion of offline blind date services in more cities; overseas business is also worth looking forward to. However, considering that there is uncertainty about the pace of economic recovery throughout the year, we lowered the company's adjusted EPS for 2023-2024 from 0.26/0.32 yuan to 0.25/0.29 yuan. The estimated 25-year EPS was 0.34 yuan, corresponding to PE 3.4/2.9/2.5X. As of December 31, 22, the company had cash and cash equivalents on the company's accounts about 1.63 billion yuan, which is close to market capitalization. The company's value is clearly underestimated, maintaining the “buy” rating. (Note: Unless otherwise specified, the exchange rate of RMB to HKD is calculated from 2023/3/29 to HKD 1 = RMB 0.8766)
Risk warning: new business development falls short of expectations, competition on social tracks in overseas markets is fierce, and changes in regulations or policies in overseas markets fall short of expectations