Performance summary:
On August 28, the company released its 2023 annual report. In the first half of the year, the company achieved revenue of HK$1 billion, an increase of 80.3% over the previous year, net profit of HK$29 million, an increase of 23.3%, and adjusted net profit of HK$58 million, an increase of 16.06% over the previous year.
Comment:
1. Rapid revenue growth drives profit growth. 23H1 maintained a high growth rate. Net profit growth rate was lower than revenue, mainly due to a slight year-on-year decline in profit margin. Among them, homologated net interest rate was -1.35 percentage points year over year, while adjusted net interest rate was -3.2 percentage points year over year. Looking at the breakdown, gross margin dropped slightly by 2.2 percent, mainly due to the increase in the share of value-added business; the third rate decreased by 0.7 percentage points year on year (sales expense rate/management expense rate/R&D expense ratio +2.73/-2.5/-0.97 percent year on year, respectively).
2. The business of all divisions is growing steadily and healthily. After the Particle Merger was completed, it maintained high growth by region and business. Among them, revenue from the Chinese market was HK$560 million, an increase of 148.2%, and the US market revenue was HK$400 million, or 34.2%; subscription service revenue mainly came from copyright protection services for large content customers, API service services for platform customers, and subscription service fees collected by Particles. Revenue increased 131.4% year-on-year to HK$467 million. Value-added services helped customers to validate and monetize content posted on China's IPTV and PTT platforms, etc. The volume increased by 51.8% year on year to HK$536 million.
3. Actively expand customers and partners to support long-term development. By the end of the reporting period, the company had 216 content customers and 137 platform customers. During the reporting period, the company had reached in-depth cooperation with Volcano Engine, and at the same time actively explored business applications in the fields of web 3.0 and AIGC. We expect that the company's capabilities in digital authorization will help it expand in related cutting-edge fields.
Profit forecast: We expect the company's revenue for 2023/2024/2025 to be 20/28/3.7 billion yuan, corresponding to net profit of 11/2.1/34 million yuan. This is an increase compared to the previous forecast (2023/2024 net profit of 0.49/135 million yuan, respectively), mainly due to the company's increased profit and accelerated progress. Maintain the “Recommended” rating.
Risk warning: Customer acquisition falls short of expectations, business growth is slowing down, and the company's collaborative promotion falls short of expectations.
