The company is a global intelligent marketing service provider, and its main business includes effect advertising service and head media account management service, accounting for 94.44% and 5.32% of the revenue, respectively. Cooperative media include head media such as Google and Meta, as well as medium-and long-tail media such as XIAOMI, Meitu and audio transmission. Customers are mainly distributed in cross-border e-commerce, mobile applications, games and other industries.
On the industry trend, "Internet platform globalization" and "retail export branding" drive overseas marketing demand. According to the annual data of eMarketer2022, the compound growth rate of the global and Chinese Internet advertising market is expected to be about 10% in the next five years. The advertising budget is inclined to procedural advertising, and its marketing is accurate and the effect can be quantified. In 2022, there are more than 2200 Chinese overseas brands with annual sales of more than 10 million US dollars. Half of BrandZ China's top 50 global brands are 3C, games and e-commerce.
Financially, revenue growth is affected by changes in macro and head customer cooperation, and profitability continues to improve. The operating income of 1H2023 Company is 998 million yuan,-24.03% compared with the same period last year, mainly due to the influence of the macro environment and the advertising flow purchased by BABA directly through Alphabet Inc-CL C (Q1 is still affected by the change in settlement method, Q2 is of the same caliber).
The company still provides effective advertising services for BABA, but the procurement cost is purchased directly from Alphabet Inc-CL C by BABA, which does not take up the company's cash, and the liquidity released is expected to provide more effective advertising and marketing services for other customers. 1H2023 gross profit rate is 23.99%. The application practice of 1H2023 AI technology has initially shown that 2Q2023 gross profit margin has increased by 3.2% month-on-month to 25.50%. The net profit margin was 11.82%. After excluding foreign exchange gains and losses, the total profit increased by 22.00% month-on-month and 26.17% compared with the same period last year. It is expected that overseas advertising will be further repaired in the second half of the year, and the overseas marketing demand of brands such as new energy, beauty care and new consumption will bring new increments for the company.
In terms of scientific and technological empowerment, the generation of AI material has greatly improved its efficiency. The company released AIGC digital marketing creation platform KreadoAI on July 12, 2023. At present, the program is mature in digital people, AI models and so on. Digital people reduce the cost of foreign model materials by 86%.
Using PE estimation method, the net profit of the company from 2023 to 2025 is 261 million yuan, 317 million yuan and 391 million yuan respectively. The median PE of the industry in 2023 is 28.21x.
Considering that the company has been engaged in overseas marketing for many years, high-quality customer resources, AI continues to reduce costs and increase efficiency, the current stock price is lower than the listing price of 18.18 yuan on August 19, 2022, we value the company 33x PE in 2023, corresponding to a market capitalization of 8.603 billion yuan and a target price of 18.23 yuan. For the first time, coverage gives a "buy" rating.
Risk hint
The risk of overseas market environment and policy change, the recovery of overseas demand is not as expected, the R & D and landing of new technology is not as expected, the risk of customer loss, the risk of concentrated suppliers, and so on.