Feitian Yundong 23H1 had revenue of 599 million yuan, an increase of 27% over the previous year; Guimu's net profit was 116 million yuan, an increase of 41% over the previous year.
The core AR/VR business continues to grow. According to financial reports, AR/VR marketing service revenue was 425 million yuan, up 25% year on year, number of customers fell 8% year on year, average consumption per customer increased 36% year on year. The entertainment industry is still the largest customer, e-commerce and automobile industries have increased markedly; gross margin is basically the same year on year. AR/VR content revenue was 147 million yuan, up 30% year on year; number of customers increased 52% year on year, number of projects increased 40% year on year, and average project price fell 7.5% year on year; benchmark projects for the first half of the year included “Wenshu Metaverse,” the country's first city-level metaverse ecosystem platform with a literary theme built in Nanjing; “online running” challenge created for the Xiamen Jiansong Marathon; etc.; gross margin increased slightly. AR/VR SaaS service revenue was 26.9 million yuan, up 36% year on year, the number of paid subscription users increased 117% year on year, and the number of customized projects increased 17% year on year; gross margin increased 17 pct to 76% year on year due to scale effects.
The ToC business has begun to gain momentum and positive results. According to financial reports, the “Li Haoya” digital person account incubated and operated by the company has garnered nearly 3 million followers 3 months after Kuaishou's launch. In the second half of the year, it is planned to launch several digital person accounts with 1 million followers one after another to form a digital person MCN matrix. The future plans are to explore monetization methods such as rewards and advertiser orders. At the same time, it is also providing commercial operation services for digital people to B-side customers. It has created and operated a digital person image with a large-scale 5A scenic spot in China.
The pressure to lift the ban was partially released, and management's commitment to voluntarily ban the sale showed confidence. On August 17, the company announced that the company's founder and CEO Wang Lei, co-founder and executive director Li Yanhao, and the controlling entities have voluntarily promised not to sell the company's shares for a period of six months from August 18, 2023. As of the announcement date, the total number of banned shares was 76.41 million shares, accounting for 42% of the company's total issued share capital.
Encouragement policies have been repeated. Apple VisionPro has opened developer applications, and the industry trend has not changed. On November 1, 2022, five departments including the Ministry of Industry and Information Technology jointly issued the “Virtual Reality and Industry Application Integration Development Action Plan (2022-2026)”; on September 8 this year, five departments including the Ministry of Industry and Information Technology jointly issued the “Three-Year Action Plan for Innovation and Development of the Metaverse Industry (2023-2025)”. Apple's MR device VisionPro was released in June, and hardware applications from developers have been open since July. We are still optimistic that the 3D content development service market will continue to grow.
Maintain buy ratings. As a leading AR/VR content service provider, the company continues to grow, but due to the slow launch of new hardware products, lack of impact on content popularity, a brief decline in the popularity of the metaverse, and the company's need to invest in new business development, we lowered the company's adjusted net profit of 305/399 million yuan in 23-24 years (the original forecast was 348/551 million yuan), an increase of 497 million yuan over 25 years.
We are still optimistic about the long-term space of the 3D content development service market. The pressure on the company to lift the ban has been partially released, and the management's voluntary ban commitment shows confidence, giving the 23-year target PE 10x (among comparable companies, according to wind's unanimous prediction, A-shares will correspond to PE 20x in '23, blue cursors will correspond to PE 30x in '23, and Hong Kong stocks will consider discounts), corresponding to the target market value of 3.3 billion Hong Kong dollars. Compared with the current market value, there is still room for 32% increase.
Risk warning: Competition in the industry has intensified, and project progress has fallen short of expectations.