Total revenue: 24Q1 We expect to reach 5.67 billion (yoy +12%, qoq -11%), with advertising and live streaming boosting the company's main growth. We expect gross margin for 24Q1 to reach 27.9% (yoy +6.2%, qoq +1.8%). The 24Q1 sales rate is expected to be 16%, the management rate is expected to be 8%, and the R&D rate is expected to be 20%.
24q1non-GAAP operating profit: We expect to reach -580 million (yoy -45%, qoq -8%), achieving continuous loss reduction. We expect 24q3non-GAAP operating profit to improve.
Advertisement: In 24Q1 we expect 1.63 billion (yoy +27.9%, qoq -15.7%). The proportion of advertising revenue in total revenue increased from 25% to 29% in the same period last year, effectively driving the company's gross profit increase. Supply side: We expect DAU growth combined with new technologies such as mixed shipping to increase VV and ad load. Demand side: We expect the increase in the supply of game content to increase demand, and categories that require detailed decisions in automobiles/digital/furniture and appliances, as well as categories that rely on online transformation, such as Internet services/education/finance, etc., will grow at a large rate.
Live streaming & VAS: In 24Q1, we expect 2.48 billion (yoy +15%, qoq -13%). Among them, live streaming revenue is the main driving force for the increase in value-added service revenue. 23Q1 mainly involved the epidemic's low liberalization base, so there was a higher increase compared to our expectations. Income expectations for members of the General Assembly have remained stable.
Gaming: We expect to reach 1 billion in 24Q1 (yoy -11.5%, qoq -0.5%). The year-on-year decline was mainly due to old games. Q2 It is expected that three products will be launched: the two-dimensional strategy chess “Things Are So New” (4.19), the strategy game “Three Kingdoms: Designing the World” (4.30), and the card game “Blazing Sky” (6.30). The new products are expected to start contributing incrementally in 24Q2.
The company's commercialization path is clear, and advertising has benefited from impressive growth in refined operations in vertical fields. The live streaming business continues to transform subscribers and users, and the growth is superior to the industry level. The new game is expected to start contributing incrementally when it goes live in Q2.
We expect the company's revenue for 24-26 to be 260/287/31 billion yuan, respectively (the original 24/25 forecast was 270/301 billion yuan, due to the delay in game launch). Based on the average average PS value of 2.1x after the comparison company's 24-year adjusted average PS, the target price was 141.14HKD (127.89 CNY), and the exchange rate HKD/CNY = 0.91, maintaining the “buy” rating.
Risk warning
User growth falls short of expectations; cost control falls short of expectations