Incident: Company 23H1 achieved revenue of 3.126 billion yuan, a year-on-year decrease of 23.0%. Net profit reached 193 million yuan, a loss of 111 million yuan for the same period in '22, turning a loss into a profit.
Revenue recovered month-on-month, and profitability improved. In '22, due to external influences such as industry regulation and competition, the company's business scale declined. Since '23, it has gradually recovered. 23H1 increased 38.4% over 22H2 to 3.126 billion yuan. On the profit side, 23H1's gross margin remained stable year on year, with a year-on-year increase of 6 pct. Although the sales rate increased due to the promotion of innovative products, since 23H1 was no longer affected by impairment of goodwill, the return net interest rate improved markedly to 6.2% year on year, turning a loss into a profit.
The main social networking business continues to be optimized, and offline is expected to contribute incrementally. In the first half of the year, the company continued to improve the live streaming platform ecosystem, optimize operation strategies, improve product iteration efficiency, enrich scenarios and gameplay, and further increase the profit margin of the live streaming business. The field of interactive social networking continues to explore diverse application scenarios, expand the social product matrix, and dig deeper into user needs in more vertical segments. User stickiness has increased markedly. In terms of new products, the company is also expanding its blind date business, opening up “super favorite” offline stores, and focusing on providing online and offline one-stop dating services for single young people after the 90s.
As more offline activities are launched one after another, the company will continue to expand the core operating cities of offline stores, further enhance brand potential, and accelerate reaching more users.
Expand innovative businesses such as skits and overseas markets, and develop a new growth curve. (1) Since '22, some projects in the company's innovation matrix have initially verified their business models. Taking a high-quality short drama project as an example, the company 22H2 began to lay out. Relying on a mature and efficient middle and back office system, it quickly sorted out the industry chain and quickly launched multiple products. Since 23 years, the size of the short drama market and the number of users have grown rapidly. With its first-mover advantage and strong promotion and marketing capabilities, the company's products have ranked first in the industry, and the overall revenue scale has continued to grow. (2) In the direction of AIGC, the company is strategically cooperating with leading enterprises, and will use industry data to further build vertical models, promote the AI intelligence process in live streaming, social networking, etc., and deepen the company's technological upgrading and application implementation in the AIGC field. (3) Overseas business is progressing steadily. We are optimistic that the company will rely on its own accumulation to expand the number of overseas product users and product penetration rate, and open up a new overseas situation.
Profit forecast and investment rating: Considering that there is some uncertainty about the recovery of the macro environment, we lowered the company's 23-25 EPS forecast of 0.22/0.28/0.33 yuan to 0.21/0.23/0.26 yuan. As of 6/30, cash and cash equivalents on the company's accounts were about 1.72 billion yuan. Close to market value, the company's stock price was clearly underestimated, and the “buy” rating was maintained. (Note: If there is no specific explanation, the exchange rate of RMB to Hong Kong dollar is taken from 2023/8/31, data 1 HKD = 0.9249 RMB)? Risk warning: New business/overseas development falls short of expectations, recovery of main business falls short of expectations