Main points of the report
The performance is outstanding, and the annual report has a high growth rate in the first quarter.
Zhi du Co., Ltd. is an Internet enterprise based on Internet media business and digital marketing business. In 2017, the company achieved a total operating income of 6.375 billion yuan, an increase of 169.69% over the same period last year, and a net profit of 527 million yuan, an increase of 66.81% over the same period last year. 2018Q1, the company realized operating income of 2.114 billion yuan, an increase of 77.42% over the same period last year, and a net profit of 201 million yuan, an increase of 63.79% over the same period last year. The company's media business is dominated by overseas subsidiary Spigot, and the performance of Spigot significantly exceeds the promised profit is an important reason for the company's rapid growth.
Powerful technology, increased investment and algorithm optimization drive the rapid growth of Spigot
Overseas subsidiary Spigot has high-quality traffic entry and strong cashability, the business model can be divided into promoting products, obtaining users, and cashing users. The main revenue comes from advertising revenue sharing or e-commerce revenue sharing with PC search engines.
Spigot algorithm technology is powerful, since its establishment in 2011 has maintained growth, the early Spigot did not expand rapidly mainly due to financial reasons. Spigot needs large-scale investment to obtain users in the early stage, and all the main profits of the company are used to pay dividends, without large-scale investment. After the acquisition of the company, the parent company increases investment, Spigot business expands rapidly, and algorithm optimization reduces costs and begins to grow at a high speed.
In the future, Spigot will expand the mobile side, expand the mature business model of the PC side to the mobile side, and contribute new increments to the company's business.
Digital marketing and domestic media business maintain steady growth
Falcon Network and Yi Fu Information are mainly domestic media business and digital marketing business. Falcon Network has become a leading domestic mobile advertising technology company driven by big data, algorithm and other technologies. Yifu Information is committed to all-digital integrated marketing, providing all aspects of digital marketing and technical solutions for brands and enterprises. From 2013 to 2017, the income of the two subsidiaries grew rapidly, and the promised profits were fulfilled, and the company's profits will maintain steady growth.
Profit forecast: coverage for the first time, giving a "buy" rating
We forecast that the return net profit of the company from 2018 to 2020 is 850 million, 1.115 billion and 1.406 billion respectively, the EPS is 0.88,1.16,1.46 yuan respectively, and the corresponding PE is 15.18,11.57,9.18 times respectively.
Risk tips: 1. The company's mobile business expansion is not as expected; 2. Competition in digital marketing business has increased.