Core views:
Incident: Tianxia Show released its 2023 annual report. In 2023, the company achieved revenue of 4.202 billion yuan, an increase of 1.77%; gross profit margin of 18.02%, a decrease of 3.73 pct; net profit to mother of 93 million yuan, a decrease of 48.43%; and deducted non-net profit of 74 million yuan, a decrease of 28.96%. Operating pressure in '23 was mainly due to macroeconomic and market environment fluctuations, and the pace of business execution was affected. Media procurement costs also increased 9.73%, accounting for 95.64% of total costs, dragging down profits. The company's net operating cash flow in '23 was 300 million yuan, and the cash flow was strong. Looking at a single quarter, in 23Q4, the company achieved revenue of 1,032 billion yuan, an increase of 0.95%; net profit loss to mother was 19.8553 million yuan, and non-net profit loss to mother was 19.0723 million yuan, and losses narrowed year-on-year.
Looking at the dismantling business, WEIQ's cornerstone business is stable, and exploring “AI+ overseas” two-wheel drive development opportunities. (1) The revenue of the celebrity marketing platform business in '23 was 4.1 billion yuan, an increase of 3.67% over the same period. By the end of '23, the number of professional celebrity accounts registered on the WEIQ platform was 1.469 million, an increase of 41.62% over the previous year; the number of MCN institutions on the platform reached 17,274, an increase of 15.41%; the revenue of celebrities at the waist and tail accounted for 85.8%, of which the revenue of tail celebrities accounted for 33.3%, an increase of 5.9pct, forming a solid foundation for the celebrity ecosystem and showing the trend of celebrity decentralization. (2) Inspiration Island's AI creative assistant functions are continuously updated, providing 30+ functional modules, covering all creative scenarios. Over 23 years, it has helped hundreds of thousands of content creators complete the creation of nearly 10 million pieces of content, and the number of users has grown steadily. In addition, the company launched aDream, a SaaS platform for overseas celebrity marketing, to support overseas brands and cross-border MCN in improving resources and efficiency.
Profit forecasting and investment advice. As a leading company in the celebrity economy, the company expects revenue of 4.725/5.250 billion yuan for 24-25 years, respectively; net profit to mother of 177/254 million yuan, respectively. The 24-year marketing market is expected to recover further, and innovative business will enable more new industry scenarios to be launched. Refer to comparable company valuations and maintain the company's 24-year 50X PE, corresponding to a reasonable value of 4.88 yuan/share, maintaining a “buy” rating.
Risk warning. (1) The growth rate of the advertising market fell short of expectations; (2) celebrity marketing competition intensified; (3) Web 3.0 development fell short of expectations.