[investment points]

According to the company's semi-annual report for 2023, 2023H1 achieved operating revenue of US $506 million, an increase of 11.0% over the same period last year; excluding the impact of head media agency business, revenue increased by 13.5% year on year.

The company realized a net profit of US $8.522 million, down 60.6% from the same period last year; excluding the impact of the sale of subsidiaries and head media agency business, the company turned its net profit from losses to profits. The company achieved an adjusted EBITDA of 518 million yuan, an increase of 789.5% over the same period last year.

Ad-tech (Advertising Technology) sector: realized revenue of $499 million and net income of $129 million. Of this total, Mintegral/Nativex achieved revenue of US $468 million / 30.98 million respectively, an increase of 13.9% over the same period last year / a decline of 19.4%. Mintegral has benefited from the group's strategic transformation and system restructuring in 2022, resulting in a significant improvement in model training and efficiency. Nativex's revenue has declined due to the divestiture of its head media agency business.

The advertising technology business centered on Mintegral is the main source of revenue and profit.

Mintegral rolled over $100000 in revenue for the 12 months ended June 30. Enterprise customers reached 460, with a customer retention rate of 93.5% and a dollar-based net expansion rate of 103.6%. Mintegral collaboration traffic APP retains well and continues to grow. The revenue of Mintegral game customers increased by 16.0% year-on-year to US $375 million, accounting for 80.1% of Mintegral revenue, of which moderate and heavy games made a major breakthrough, up 76.1% year-on-year, accounting for 29.7% of Mintegral revenue. The company actively develops a variety of vertical tracks while maintaining the long-term advantage of light / ultra-light games.

Mar-tech (marketing technology) sector: realized revenue of $7.32 million, up 10.3% from a year earlier.

Mar-tech is still in the early stage of product polishing, which does not constitute the main driving force of revenue growth, but the system data feeds Mintegral and forms a closed loop with Ad-tech two-wheel drive, resulting in significant business synergy.

The company's profitability continues to improve. 2023H1 realized a gross profit of US $103 million (yoy+14.4%) and a gross margin of 20.3% (yoy+0.6pct). Sales / R & D / management expenses were US $1 million in 26-42-27, with year-on-year changes of-34.9% and 7.9% respectively. The improvement of the cost side is mainly due to the reduction of incentive costs and the decrease of model training costs caused by the gradual maturity of the algorithm.

[investment advice]

Huilun Technology as the world's leading intelligent advertising service technology company, Ad-tech and Mar-tech two-wheel drive, the core product Mintegral is the global head of the third-party programming advertising platform. The algorithm is polished and mature and enters the period of stable profit release. Benefiting from the trend of decentralization of overseas traffic and the support of AI large model algorithm, the company is expected to have a lot of room for revenue growth. We maintain our profit forecast and expect the company's 2023-2025 revenue to be $1.623 billion, realizing a net profit of $0.16 million, corresponding to an EPS of $0.01, 0.03 and PE of $0.03, respectively, for 50-20-15. Maintain a "buy" rating.

[risk Tip]

Market competition intensifies

Macro-economic downturn

The new business expansion is not as expected.