Company profile

The company is the MCN leader in live e-commerce. Its main business includes social e-commerce, internet advertising agency, internet advertising, and footwear business. The revenue in 2022 accounted for 59.8%/28.7%/3.2%/8.2% respectively. With increased clean-up efforts for shoes and clothing since 4Q2022, the business was lightweight, actively expanded categories and increased AI tracks to improve operational efficiency.

Investment logic

In terms of industry trends, live e-commerce anchors are developing in a decentralized manner. The size of the live e-commerce market in 2022 was about 3.4 trillion yuan, a growth rate of 34%. The live and self-broadcast formats of celebrities complement each other, and each is expected to account for 50%. The number of MCN institutions has exceeded 24,000, and they have entered the stage of inventory optimization. In this environment, MCN's competitiveness lies in its ability to manage supply chains, incubate anchors, and manage traffic.

The company's full platform layout and established a matrix of anchors. The company continues to cultivate on platforms such as Douyin and Kuaishou. In 2022, GMV was about 15 billion yuan, a growth rate of about 50%. An anchor team of artists+talents was set up, and the total number of signed artists reached 51, and the anchors were managed gradiently. The company collaborated with Xiaobing to develop digital virtual live streaming to receive long-tail traffic, which can partially replace mid-level store broadcasts and extend the live broadcast time.

The live streaming process is standardized and replicable to promote intelligent product selection. The remote vision cloud platform deconstructs the entire live broadcast process into more than 100 sessions, and can complete the training of a group of operation teams in 1-2 weeks. The company actively embraces AI technology and develops intelligent product selection functions based on live e-commerce scenarios, which is expected to effectively improve product selection efficiency and effectiveness.

“Increase time+expand categories” is the main driver of growth. In 2022, the company effectively started broadcasting only 83 entertainers and anchors. The average monthly live streaming time for head/midwaist/tail anchors was 27.9 hours/29.7 hours/9.5 hours. There is room to double the company's live broadcast time against the daily live broadcast room (the average monthly live broadcast time is 45 hours selected by Dongfang and 53 hours for making friends). In terms of category expansion, efforts will be directed towards non-standard clothing categories.

Deeply cultivate the supply chain and create a new commercial enterprise for live streaming. The digital apparel marketing industry base “Fu-shook” was launched, a “destination-style” shopping scene was created offline, and the supply chain pallet and live streaming of stores were empowered online. The creation of a supply chain platform will revolutionize the way waist experts are served, shifting from “N to 1” to “1 to N”.

Profit forecasts, valuations, and ratings

Using the PE valuation method, the company's net profit from 2023 to 2025 was 450 million yuan, 614 million yuan, and 993 million yuan respectively. Referring to the industry's median PE valuation in 2024, considering that the landing and opening of the company's offline commercial entity is expected to link online and offline traffic and bring additional volume to the company, the company was given 25x PE valuation in 2024, corresponding to a market value of 15.343 billion yuan and a target price of 16.49 yuan, covering the “buy” rating for the first time.

Risk warning

Consumption recovery fell short of expectations; category expansion and multi-platform operation results fell short of expectations; loss of leading anchors; risk of impairment of goodwill and inventory; application of new technology fell short of expectations, etc.