The Zhitong Finance App learned that recently DAMO released a research report pointing out that the financial data of Weimeng (02013) for the first half of 2023 exceeded market expectations, and that stable revenue momentum and further cost optimization will restore the market's confidence in its profitability. DAMO said it would upgrade Weimei from holding to purchase rating, with a target price of HK$4.8.

Damo pointed out that Weimeng's annual revenue of 1H23 was 1.21 billion yuan, an increase of 34% over the previous year, 17 percentage points higher than market expectations, and gross margin increased to 68% month-on-month. The net loss figure was far less than DAMO's expectations. Among them, subscription solution revenue increased 21% year on year to 705 million yuan, up 24% year on year, higher than the 20% growth target for the whole year. This was mainly driven by a 26% increase in average revenue per user (ARPU).

Weimue's core business smart retail revenue increased 32% year over year, and endogenous growth of 45% year over year. The AI product WAI has received positive feedback from customers and is expected to have an additional revenue opportunity of RMB 250 million, which is equivalent to about 20% room for growth.

In terms of merchant solutions, Weimue's revenue increased 58% year on year to 504 million yuan. This mainly depends on the recovery of the advertising market, the strong development momentum of Tencent Video, and the diversification strategies of other platforms such as Weimue's accelerated entry into Kuaishou. Weimeng said it plans to help merchants with a gross revenue target amount of 14 billion yuan for the whole year, and plans to focus on high-profit customers from the second half of 2023, rather than just pursuing total revenue growth.

Danmo believes that the market has acknowledged Weimei's ability to implement its strategy in the high-end market. The steady recovery of Weimance's SaaS business, strong advertising growth, and improvements in R&D efficiency help to actually reach the goal of balancing profit and loss in the second half of 2023. Weimue expects the SaaS business to grow 15-20% in 2024, the advertising business to grow 15%, achieve profit from the SaaS business in 2025, and the company's net profit will reach 500 million yuan.