Excellent: Backed by Tencent, the leading SaaS provider in China

The main business is divided into five core sectors: social e-commerce, new retail, beauty, education, and international business; social e-commerce business - providing merchants with private domain operation solutions in various industries to help merchants build online shopping malls across all channels; Youzan New Retail - using global marketing, shopping guide distribution, and member operation as the three major growth engines to help digital retail upgrade; there are integrated management solutions for the beauty industry; Youzan Education - provides integrated management solutions for educational institutions; international business - cross-border e-commerce AllValue.

Industry: Digital transformation is accelerating, and the importance of “private domain” is increasing

Digital transformation is accelerating, digital consumption potential is increasing year by year, and the importance of online channels in the retail industry is increasing; four main factors drive merchants to lay out private domains, with the epidemic as a catalyst; private domain value advantages: private domain scenarios provide interactive value - revitalize user assets, promote private domain transformation, and deepen user insight; private domain development results: brand merchants generally benefit, and various platforms build diversified private sector scenarios growth logic: the company's business dilemma is reversed. Video numbers or new volume growth opportunities have been brought about by one: there is a new retail market to help merchants operate globally. In May 2021, Youzan's new retail will become an independent business brand, integrating products and solutions such as Youzan Retail, Youzan Chain, and Youzan Enterprise WeChat Assistant, etc., releasing the “ONE Strategy” and choosing to cooperate with Shanghai Bojun Software Technology Co., Ltd., a leading retail digital service provider (Bojun is deeply involved in the three major products of offline ERP, OMS and POS; Youzan's online layout, mainly shopping malls, SCRM, enterprise micro and shopping guides, forming an integrated module). ONE Strategy helps Youzan achieve a system combination of global marketing, private domain operations, shopping mall operations, and store operations. We believe that the current problem for enterprises is that it is difficult to improve internal efficiency due to system fragmentation, and that new retail solutions may meet the actual needs of enterprises to reduce costs and increase efficiency.

Growth space 2: Youzan X video number, providing one-stop solutions. The impact of the epidemic and the development and popularization of 5G technology have promoted the development of the short video and live streaming industry. In '21, the number of daily active video users has exceeded 500 million. Video accounts rooted in the WeChat ecosystem ushered in Internet dividends, rapidly deploying short video content entrepreneurship and commercialization. In July 2022, the video account's native information flow advertisement was launched, supporting 7 types of promotion goals (including customer acquisition, private domain accumulation, direct purchase, etc.). In the same month, the WeChat Mini Store was launched, bringing a live streaming delivery function. We believe that the development of video accounts has further enriched and promoted the development of the WeChat ecosystem, improved the closed loop of business within the WeChat ecosystem, and will help brands accumulate private traffic and enhance commercial monetization capabilities.

Investment advice: We believe that the company's business has continued to improve since 3Q22. The optimization of epidemic prevention measures is conducive to the continuous recovery of the company's business, and the launch of Tencent Video is expected to bring additional volume. Bloomberg unanimously expects 23E-25E revenue of 15/17.18 billion yuan and net profit of -0.05/0.13/27 billion yuan. Attention is recommended.

Risk warning: 1) ARPU and the number of contracted companies declined; 2) macroeconomic fluctuations; 3) related estimates are based on subjective assumptions and are for reference only.