Key points of investment
Event: The company achieved revenue of 6.845 billion yuan in 2023, an increase of 8.3% over the previous year. Net profit reached 400 million yuan, and in 2022 it was a loss of 168 million yuan, turning a loss into a profit. Adjusted net profit was approximately $430 million, up 9.9% year on year. At the same time, the board of directors decided to recommend a dividend for the end of 2023 at HK$0.0412 per share, totaling approximately HK$79.9 million.
Monetization of main business users increased, contributing to stable cash flow to the company. Although monthly activity of the company's main products declined year-on-year in 2023, monetization capacity increased, and ARPU increased 26.9% year-on-year to 25 yuan. The Yingke live streaming platform has maintained a steady development trend, and the monetization logic of the social product matrix has been continuously optimized, and market competitiveness has improved. The steady development of the core live streaming social networking business provides sufficient financial support for the company, and also effectively promotes the company's multi-business expansion and continuous innovation.
Short dramas and overseas business gain strength to open up room for growth. (1) The short drama business contributed an important increase to the company in 2023, with revenue from entertainment content services of 959 million yuan, accounting for an increase of 13.36 pct in revenue. The company first entered the short drama market in the second half of 2022. As of March 2024, Yinguniverse had produced hundreds of short dramas, reaching more than 300 million users, and a total broadcast volume of over 10 billion. Among them, there are nearly 60 blockbuster dramas that have sold over 10 million hits in a single series. The company is also experimenting with skits and launched the short drama apps Redshort and Reelbox to the North American and Southeast Asian markets respectively. We look forward to increasing contributions in the future. (2) Overseas revenue increased significantly over the same period last year. The company focuses on localized operations and has deployed localization teams in Vietnam and Thailand. After continuous refinement in the early stages and continuous optimization of the product and operation side, some social networking products have entered the top of the best-selling social apps in Vietnam. In the future, by continuing to increase investment in overseas products with proven business models, formulating differentiated payment strategies, improving user stickiness and usage time, expanding product coverage and penetration rate; exploring segmentation needs, continuing to create high-quality, high-stickiness products, and building diversified product matrices such as personality matching, voice communication, video companionship, and interactive sharing, it is expected to further open up space for overseas market growth.
Profit forecast and investment rating: Considering that the company's short story and rapid overseas business growth require corresponding investment, we lowered the company's 24-25 EPS forecast from 0.23/0.26 yuan to 0.20/0.21 yuan, and added a 26-year EPS forecast of 0.21 yuan, which corresponds to PE 4.04/3.91/3.81 times. As of 12/31, cash and cash equivalents on the company's account were about $2.36 billion; based on the 2023 annual dividend payment amount and 2024/3/28 stock price, the current position is still highly cost-effective and maintains a “buy” rating. (Note: Unless otherwise specified, the exchange rate of RMB to HKD is based on 2024/4/1 data: 1 HKD = 0.9240 RMB)
Risk warning: New business/overseas development falls short of expectations, and the recovery of the main business falls short of expectations.