Key points of investment
Incident: The company achieved revenue of 52,616 billion yuan in 2023, an increase of 43.44% over the previous year; net profit to mother was 117 million yuan, which was corrected year on year; and distributed 0.1 yuan (tax included) for every 10 shares, with no increase. The company achieved revenue of 15.78 billion yuan in 2024Q1, a year-on-year increase of 61.47%; net profit to mother was 82.325 million yuan, a year-on-year decrease of 44.65%.
Full case promotion and overseas marketing grew rapidly, and the main business achieved continuous growth. In 2023, total promotion revenue was 11.282 billion yuan, a sharp increase of 73.05% over the previous year; overseas advertising revenue continued to increase, with revenue of 37.363 billion yuan, an increase of 41.69% over the previous year, accounting for more than 70% of total revenue. The company's agency TikTok For Business advertising revenue grew by nearly 50%. After cooperating with Microsoft Advertising and Pinterest in 2023, the performance developed rapidly. The overseas business will continue to be an important direction for the company's large-scale growth and profit in the future. In the first quarter of 2024, profits declined due to changes in the macro environment and rapid growth in overseas business with low gross margins.
Strong AI? Strategy, pursuing “AI First”. During the reporting period, the company achieved 100% full staff coverage in the “human+AI” work model, and the overall business productivity increased by about 50%. In September 2023, the industry model BlueAI 1.0 was released. Together with Baidu, Smart Spectrum, Microsoft China, Google and many other cloud platforms, it is now used in key projects such as overseas and domestic integrated marketing, content marketing, and advertising. In 2023, AI-driven revenue reached 108 million, and is expected to grow by 5-10 billion yuan in 2024. BlueAI will continue to upgrade to multi-modal, multi-scene intelligence.
Investment advice: The company fully embraces AI to continue to empower the rapid growth of the business. The company uses AI development opportunities to vigorously expand overseas business, but the overall gross margin of overseas business is low; at the same time, the company's 24-year management expenses will still include large restricted stock expenses. We adjusted our original 24/25 company forecast. The estimated net profit from 2024 to 2026 is $3.51/596/766 million (previously forecasted net profit of $9.09/1.52 billion yuan for 24/25), EPS of 0.14/0.24/0.31; PE of 45.6/26.8/20.9; maintaining the “buy-A” proposal.
Risk warning: AI and metaverse business development falls short of expectations, macroeconomic downturn, risk of impairment of goodwill and assets, and risks associated with increased market competition.