Event
The company released its annual report for 2018, with an operating income of 760 million yuan in 2018, an increase of 4.2% over the same period last year, and an adjusted net profit of 201 million yuan, an increase of 29.7% over the same period last year.
Brief comment
Advertising revenue continues to grow rapidly, with the proportion of mobile devices rising to nearly 90%. In 2018, the company achieved advertising revenue of 596 million yuan, an increase of 60.1% over the same period last year. The gross profit margin of the advertising business reached 84.7%, an increase of 8.5% over the same period last year. The proportion of advertising revenue from Mobile APP increased to 86.9% from 63.0% in 2017. In 2018, the company's advertising revenue from BABA reached 44.9 million yuan, accounting for 7.5% of the total advertising revenue. In 2018, the proportion of advertising revenue not directly related to maternal and child products reached 27.4%, an increase of 4.6% over the same period last year, indicating that more and more household consumer brands regard the company's products as an effective media platform.
E-commerce business strategy adjustment, in-depth cooperation with BABA, looking forward to 2019 performance. In the second half of 2018, strategic investor BABA gradually provided the company with e-commerce operation services to reduce the company's operating costs, and the company became responsible for client management and diversion of e-commerce business. as a result, the company took the initiative to control the scale of e-commerce in 2018, realizing e-commerce revenue of 135 million yuan, down 59.3% from the same period last year. It is expected that the company's e-commerce business will be connected with BABA for all-round and deep integration in the second quarter of 2019.
MAU continues to grow, multi-investment layout of mother-to-child ecology. In 2018, the company's MAU reached 144 million, an increase of 3.7% over the same period last year, of which the mobile app MAU reached 23 million, an increase of 35.1% over the same period last year. In 2018, the MAU of APP conceived by Baby Tree reached 18.4 million, an increase of 23.5% over the same period last year, and the MAU of hourly APP reached 4.3 million, an increase of 126.3% over the same period last year. In 2018, the company invested in Mom and Dad Camp and Momself Wechat platforms to enhance the company's influence in the Wechat ecosystem. Among them, the parents' camp serves middle-class parents of children between the ages of 2 and 12, and Momself addresses the emotional needs of mothers of all ages. The above investment helps to expand the company's coverage of mother and child groups and the extension of users' age groups.
Strengthen R & D investment, enhance user experience and value. As of 2018, the company has set up artificial intelligence development departments in Beijing, Hangzhou and Wuhan, accounting for 34.1% of the company's technical personnel. In 2018, the company's R & D expenditure reached 125 million yuan, an increase of 59.6% over the same period last year, accounting for 16.5% of the revenue.
Performance forecast: the adjusted net profit of the company in 2019 and 2020 is expected to be 5.89 and 889 million yuan respectively, maintaining the "overweight" rating.
Risk hint: newborn decline, cooperation with BABA is not as expected