Key points of investment:

Easypoint World is a high-quality domestic overseas marketing enterprise. The business model is different from that of ordinary advertising agencies. Easypoint World was founded in 2011 to provide global marketing and promotion services for advertisers going overseas. Its main business includes performance advertising services and leading media account management services. The company has established stable cooperative relationships with media such as Google, Facebook, ByteDance, etc., or their agents, and uses self-developed intelligent business systems such as TOPMedia CMP, YeahTargeter, and Yeah-CMP to provide overseas marketing solutions for advertisers in various industries such as cross-border e-commerce, tool applications, and games. Easypoint World provides effective advertising services. The biggest difference from ordinary advertising agencies is that through an intelligent delivery system, advertising efficiency is improved, advertising effectiveness is optimized, and advertisers bear uncertain risks between advertisement display and effective conversion.

The general manager took office and announced a draft restrictive employee equity incentive plan. The incentives were sufficient. In July 2023, the company announced that Chairman Zou Xiaowu had resigned as general manager to explore new business development directions. Wu Ying, the new general manager, joined Easypoint for 8 years and has a deep understanding of the business. The company recently released a draft equity incentive plan. Among them, Chairman Zou Xiaowu received 1.5 million restricted shares, accounting for 0.32% of the total share capital at the time the draft was announced, Wu Ying, general manager, received 0.25% of the total share capital at the time the draft was announced, Wang Yizhou, deputy general manager, received 0.16%, and director Wang Ping received 0.04%, providing sufficient incentives to the company's general manager and business team.

Marketing overseas changes on both sides of supply and demand are beneficial to third-party service providers. Easypoint World is expected to benefit from this. On the demand side: 1) The negative impact of the epidemic on cross-border trade has gradually subsided, economic activities related to overseas travel have resumed, and advertisers' investment confidence is expected to recover; 2) The budget share of existing customers is expected to increase: Internet companies are likely to reduce costs and increase efficiency clearly. We believe that the overseas marketing budget is expected to gradually be skewed from self-built teams to external third parties that can better assess ROI; 3) Incremental budget increases: brands seeking growth overseas is a major trend. Policy encourages+Amazon blocks independent websites to build a large number of websites, favoring third party overseas marketing service providers. On the supply side: 1) The mobile app usage habits of overseas users are different from those at home. Domestic super apps are more concentrated, and user behavior is more scattered among overseas secondary apps; 2) After the adjustment of Apple's IFDA strategy, medium- and long-tail traffic value and media value have increased, benefiting third-party service providers.

With the launch of an AI assistant, EasyPoint is expected to improve material efficiency and generate revenue by serving small to medium advertisers. According to the company's 2023 semi-annual report, KreadoAI, the company's first AIGC digital marketing creation platform, was officially released. Relying on the four major solutions of “AI digital people, AI models, AI tools, and AI creative assets”, KreadoAI provides multi-scenario solutions including AI digital population broadcast video, 1:1 live digital human cloning, voice text cloning, AI generated marketing copy, AI text dubbing, AI intelligent cutouts, AI model generation, and smart wearable products, etc., and can conduct digital marketing management for creative trend insight, material marketing effectiveness data analysis, and popular content analysis before, during, and after marketing.

Investment Rating and Valuation: First coverage, giving a buying rating. We expect that in 2023-2025E, the company's revenue will reach 2,890 million yuan/3.670 billion yuan/4.617 billion yuan, respectively, an increase of 25%/27%/26% over the previous year, and achieve net profit of 264 million yuan/297 million yuan/376 million yuan, respectively, an increase of 1%/12%/27% over the previous year. Under the comparable company valuation method, we gave Easypoint World 35 times PE in 2024, corresponding to a market value of 10.4 billion dollars. First coverage, giving a buying rating.

Risk warning: the risk of high concentration of suppliers; the risk of budget cuts for leading advertisers; the risk of domestic companies going overseas to face political risks; and the risk of increased competition.