Mintegral grew steadily, the profit side improved significantly, and maintained a “buy” rating
The company's revenue in 2023 was US$1,054 million, up 17.85% year on year; net profit was 18.5.88 million yuan, up 82.41% year on year; adjusted EBITDA was US$105 million, up 191.32% year on year. The company's advertising technology business made a profit of $51.11 million, and its marketing technology business lost $1989 million. Profit side growth is due to Mintegral's capacity upgrades combined with significant optimization of infrastructure costs. Based on the steady development of the company's advertising technology business and the gradual loss reduction forecast for the marketing technology business, we lowered our profit forecasts for 2024, 2025 and added 2026. The company's net profit for 2024-2026 is 0.40/0.72/0.88 (previous value was 0.44/0.79) billion US dollars respectively, corresponding EPS was 0.03/0.05/0.06 US dollars, respectively. The current stock price corresponding to PE is 16.7/9.2/7.6 times, respectively. We are optimistic that the company's scale effect will drive revenue growth and maintain the “buying” evaluation grade.
Globalization and multiple strategies have achieved remarkable results and exploited overseas dividends
Since 2023, the company has focused on developing emerging markets in Europe, America and Asia, focusing on small and medium-sized developer customers, with remarkable strategic results. By the end of 2023, the number of Mintegral SDK applications integrated by the company had quadrupled from the beginning of 2022, and most of them came from small to medium developers. In terms of customer structure, the company continued to expand multiple categories by improving the efficiency of the intelligent bidding system, and the share of medium to heavy game revenue increased by 8 pcts year-on-year to 29% by the end of 2023.
In terms of regional distribution, the share of European and American customer revenue increased from 28% at the end of 2022 to 45% at the end of 2023.
The company will continue to expand medium to heavy gaming, e-commerce and other customers, and adhere to a global strategy to seize overseas dividends.
The cost and expense side is clearly optimized. Repurchase shows confidence in development, and room for growth may gradually open up
The company continues to optimize costs and uses personalized computing power technology to reduce the cost per server to 5% from 9% in early 2022. In addition, the company implemented staff reduction and new product development aimed at narrowing the losses in the marketing technology business, increasing the company's gross margin by 0.8 pct to 20.6% year on year in 2023, sales expenses decreased by 23.1% year on year to 51 million US dollars, R&D expenses decreased 11.8% year on year to 94 million US dollars, and significant cost side optimization. Benefiting from Mintergral's improved marketing efficiency and reduced customer acquisition costs, there is still room for improvement on the company's profit side. At the same time, the company plans to increase the capital amount of HK$80 million (the amount is HK$250 million after the increase) to the current share repurchase plan, further demonstrating confidence in development. We believe that the company's globalization and multi-category customer development strategy will continue to advance, business expansion will drive scale effects, and the company's commercialization space is expected to gradually open up.
Risk warning: advertising industry policy changes, increased competition in the industry, AI applications falling short of expectations, etc.