Since completing the transformation of its main business in 2016, it has achieved collaborative development of the two core businesses of “Internet Media+Digital Marketing”, and has now become a leading Internet marketing company in China. The company's performance was outstanding. Revenue and net profit in the first three quarters of 2018 achieved 27.9% and 75.9% year-on-year growth rates, making it one of the companies with the fastest growth and highest barriers in the marketing sector.
The industry enters stock competition, and innovation & traffic are the core elements. Internet advertising as a share of GDP is nearing the ceiling, and the industry may enter a stage of slow growth. Internet usage time has reached the “4 hour” bottleneck, and competition for user time is heating up. The core of future market competition is innovation ability and traffic accumulation. Marketing service providers with innovative technology and full-service capabilities will have stronger bargaining power and greater profit margins.
The trinity of “traffic+platform+channel” builds a strong moat. The company is a mobile Internet company that has the three of a mobile Internet traffic portal, a traffic management platform, and a commercial monetization channel.
Spigot: A top internet technology company driven by “algorithm+big data.” Spigot is the company's overseas Internet media platform. It is a scarce domestic overseas traffic entry platform. The algorithm has high technical barriers, guaranteed profit margins, and is the company's core profit source.
Domestic media platforms: aggregate medium- and long-tail resources to establish traffic matrices. The domestic media platform mainly focuses on FMOBI, 10,000 visitors, and application exchanges. It has massive resources, covers a wide range of user groups, and has established a huge traffic matrix, providing the basic conditions for commercial monetization.
Digital marketing business: Connect with high-quality customers and rich media resources. The company's digital marketing business has core agent qualifications such as Tencent, Guangdian, Baidu, and VIVO; serves brands such as FMCG, home appliances, automobiles, etc., has high-quality media resources from mainstream forums, news, Q&A, video, etc., and has strong integrated marketing capabilities.
Furthermore, in order to enrich the layout of the Internet industry, the company is focusing on expanding into mutual fund and gaming businesses, which is expected to further enhance the company's profitability.
Profit forecasts and investment recommendations. EPS is expected to be 0.81 yuan, 1.04 yuan, and 1.23 yuan respectively in 2018-2020, and net profit returned to the mother will maintain a compound growth rate of 31% over the next three years. Referring to comparable company valuations, the company was given 20 times its 2018 valuation, corresponding target price of 16.20 yuan, covering the “buy” rating for the first time.
Risk warning: Risk of increased market competition, risk of large fluctuations in overseas business, risk of loss of core talent, risk of business development falling short of expectations.
