Incident: In 2023, the company achieved operating income of 52,616 billion yuan, a year-on-year increase of 43.44%, net profit to mother of 117 million yuan, an increase of 105.36% year-on-year, and net profit of 150 million yuan after deducting non-return to mother, an increase of 107.91% over the previous year. In the first quarter of 2024, the company achieved operating income of 15.782 billion yuan, a year-on-year increase of 61.47%, and net profit to mother of 82 million yuan, a year-on-year decrease of 44.65%.
The revenue scale growth momentum is strong, and the core advantage is stable. By business, the company's total promotion service revenue was 11,282 billion yuan, up 73.05% year on year, mainly due to the increase in customer marketing scale in the game, e-commerce and other industries; overseas advertising achieved revenue of 37.363 billion yuan in 2023, an increase of 41.69% year on year. The company's agency revenue from various overseas media channels maintained a rapid expansion trend, and advertising revenue from leading media platforms Meta and Google remained at a double digit level. Tiktok for Business grew nearly 50% year on year, new Partner channels Microsoft Ads and Pinterest also achieved multiplier revenue growth. In terms of gross margin, the gross margin of the company's overall promotion services fell 4.40pct to 8.37% year-on-year due to strong competition in the domestic market. The gross margin of the overseas business remained stable at 1.66% due to the revenue scale advantage.
Actively lay out AI strategies to help reinvent the business. In 2023, the company will deeply implement “AI?” The strategy collaborated with Baidu, Zhiguo, Microsoft China, Google and other cloud platforms to release the industry model BlueAI 1.0 to create AI digital infrastructure; in specific business applications, content created by generative AI has already been applied to about 68% of the company's customer projects, and AI has also increased the company's overall business efficiency by about 50%. In 2023, the company created nearly 300 AI marketing cases, and AI-driven business revenue reached 108 million.
As technology advances and the company's AI digital infrastructure improves, the share of revenue driven by AI is expected to gradually increase.
Profit forecast and investment advice: We are optimistic that the company will grasp the trends of the times and achieve improved operating efficiency and revenue scale expansion. The company's net profit for 24/25/26 is 3.83/5.39/644 million yuan, YoY +229%/+41%/+20%, maintaining a “buy” rating.
Risk warning: The recovery in advertisers' demand falls short of expectations, the development of AI technology falls short of expectations, and market competition intensifies.