Event description

The company announced the third quarterly report of 2023: in the first three quarters of 23, the company realized revenue of 1.584 billion yuan, down 15.23% from the same period last year, and realized net profit of 181 million yuan, down 27.79% from the same period last year. 23Q3 achieved revenue of 586 million, an increase of 5.63% over the same period last year, and a net profit of 61 million, down 14.96% from the same period last year. Excluding the impact of foreign exchange gains and losses, the net profit was 61 million, an increase of 61.94% over the same period last year.

Event comment

Q3 continues the improvement trend of Q2. The company's settlement mode with BABA in 2022 became BABA's direct purchase flow. In 2021, BABA accounted for more than 40% of the company's revenue. Q1 was still affected by the change in settlement mode, and Q2 began to have the same caliber. Since March, advertisers have been active in trading, and large customers have continued to sell volume. Q3 revenue end has increased by 5.63% compared with Q2 year-on-year growth rate of 0.24%.

The higher base period of exchange earnings affects the apparent net profit, and AIGC improves the efficiency. The decrease in exchange gains led to a decline in apparent net profit compared with the same period last year.

Due to the rapid appreciation of the US dollar, 22Q3 achieved exchange earnings of more than 4000w, while 23Q3 only 91w led to a decline in apparent profit growth. Excluding the impact of exchange gains and losses, 23Q3's homing net profit increased by 61.94% year-on-year and 12.37% month-on-month growth.

Equity incentive is bound to high-quality management, which is good for long-term development. The company issued a restricted equity incentive plan in mid-October, involving 49 directors, general managers, secretaries and core business backbones. The performance goal is to eliminate the impact of exchange gains and losses and share payment fees on the total profits for 23-24 years, which are not less than 275% and 345 million respectively, with a corresponding growth rate of 21% and 25%. The core backbone is fully encouraged, which is conducive to the medium-and long-term development of the company.

Launch AIGC digital marketing creation platform, go deep into AI layout. On July 12, the company launched AIGC digital marketing creation platform KreadoAI. At present, the number of global registered users is more than 60w, covering 67 countries, and the monthly user visits have exceeded 100w, realizing the closed loop of AI technology, service solution scenarios and marketing data. It has achieved remarkable results in reducing the cost, improving quality and increasing efficiency of the whole link in the marketing field.

On the one hand, the company is expected to share the increased demand for procedural advertising and domestic Internet groups going out to sea, as a first-tier agent Microsoft Corp to enjoy the New Bing market share increase dividend, on the other hand, with the help of AIGC enabling self-development of intelligent business system to improve the efficiency of effective advertising. Taking into account the exchange gains and losses and equity incentive fees, we expect the company to achieve a return net profit of 245 million / 304 million in 23-24 years, corresponding to 35 PE, respectively, and maintain the "buy" rating.

Risk hint

1. The risk that the development of AI technology is not as expected.

2. The overall recovery of the advertising industry is not as risky as expected.