Key points of investment

Incident: 2023H1 achieved revenue of HK$1.0 billion (yoy +80.3%), gross profit of HK$390 million (yoy +70.6%), and adjusted EBITDA of HK$180 million (yoy +38.9%). Revenue and profit have increased by double digits, and the synergistic effects of Particle Technology have already been shown.

The sharp increase in volume and price has driven revenue growth, and cooperation with major customers has blossomed more.

By business, 23H1 subscription service revenue was HK$4.7 billion (yoy +131.4%), and value-added service revenue was 540 million yuan (yoy +51.8%). The integration of the Particle Technology business is accelerating, driving a sharp increase in volume and price. In terms of volume, the total number of 23H1 customers reached 353 (18 more customers than in '22); in terms of price, the average monthly revenue per customer reached 470,000 HKD (yoy +11%). The company manages 2.81 million active social media assets (an increase of 260,000 from '22), and manages 2.3 million hours of paid video and television content (200,000 hours over '22).

By market, 23H1's revenue from the mainland China market was HK$560 million (yoy +148.2%), and revenue from the US market was HK$4.4 billion (yoy +34.2%). Fubo has established new collaborations with various content customers and platforms in China, such as developing all-round cooperation with Hunan Radio and Television, technical cooperation and content overseas cooperation with China Mobile International, and also cooperating with radio and television groups in various provinces across the country.

Maintain stable cooperation with content providers in the US market and expand the scope of services for some key customers.

Fingerprinting and watermarking technology continue to iterate, and the barriers to competition are being strengthened. The company continues to upgrade core technologies such as genetic digital fingerprinting and watermarking to continuously improve infringement identification rate and accuracy. In line with Web3 and AI trends, the company and partners jointly explore scenarios such as digital content authorization, rights protection, and property rights transactions. Furthermore, the company has greatly upgraded its original new media management and distribution platform, opened up distribution channels for major domestic new media platforms, reached cooperation with Volcano Engine, and introduced its short video production and other tools.

The digital content industry is developing rapidly, and data authorization and transactions are on the right track. The digital content industry in the Chinese market is developing rapidly, demand for circulation, aggregation, and processing of various types of data has increased, and data authorization and transactions are gradually on the right track. At present, the company has obtained two projects from the China Copyright Protection Center, namely the right to confirm the copyright of digital people and the right to confirm the copyright of audiovisual works. As one of the leading companies in digital content asset protection and trading, Fu Bo has a complete data element management infrastructure, experience in monetizing short and medium videos for global social media platforms, and cutting-edge fingerprinting technology and watermarking technology, which is expected to benefit from the overall development of the digital content industry.

Profit forecast and investment rating: Considering the company's continued investment in developing new customers and technology research and development, which may have a certain impact on the cost side, we lowered the company's net profit forecast for 2023-24 from HK$16/270 million to HK$0.8/110 million, and estimated net profit for 2025 to HK$140 million. We expect the company's non-IFRS net profit for 2023-2025 to be HK$1.2/188/220 million, and the current stock price corresponding to 2023-2025 PE is 41/28/23 times, maintaining the “buy” rating.

Risk warning: Increased competition in the industry, new customers falling short of expectations, policy regulation risks.