The net loss for 24Q1 was 22.71 million yuan. The year-on-year decline in gross margin was worth the publication of the 23rd Annual Report & Quarterly Report for the year 24. In 2023, revenue of 1,452 billion yuan (yoy +18.17%), net profit to the mother was 74.773 million yuan (yoy -11.92%), after deducting non-net profit of 630,910,000 yuan (yoy -5.59%). 24Q1 achieved operating income of 296 million yuan (yoy +16.85%, qoq -39.85%) and net profit to mother of 22.7119 million yuan. The main causes of loss in Q1:1) e-commerce seasonality and year-on-year changes in business structure led to a year-on-year decline in gross margin; 2) 24Q1 R&D expenses were 42.1 million yuan, an increase of 30% year over year, which is expected to show results through AI/efficiency improvements and overseas travel; 3) Q1 generated 10,000 yuan in charitable donations. Considering the decline in the company's gross margin and continued investment in R&D expenses, we lowered the company's profit forecast. The company's net profit to mother for 2024-2025 is estimated to be 1.4/180 million yuan (previous value: 1.9/240 million yuan), respectively, and an additional net profit forecast of 200 million yuan for 26 years. 24 Comparable company Wind agreed to expect an average PE value of 25 times. Considering the company's active AI deployment, platform users still have room to grow, giving the company 30 times PE in 24 years, with a target price of 21.11 yuan (previous value 27.36 yuan), maintaining a “buy” rating.

New business revenue growth rate is high, AI enables platform content production

In '23, “What's Worth Buying” generated revenue of 950 million yuan, accounting for 65.74% of revenue. In '23, the publication volume of “What's Worth Buying” content also increased by 38.79%. Among them, Machine Contributed Content (AIGC) also increased by 150.58%, accounting for 36.66%. In 2023, the platform MAU was 39.2897 million, up 1.02%. The number of registered users was 28.8968 million, an increase of 9.5% over the same period. “What's worth buying” and the corresponding mobile app confirmed that GMV reached 20.918 billion, an increase of 1.23%. In addition, new businesses (including full-link media matching services, proxy operations) generated revenue of $5.0 billion, an increase of 45.79%. It is expected that with AIGC's empowerment, the efficiency of the platform's operation and content richness are expected to improve, subsequent user growth is worth looking forward to, and new businesses are expected to continue to contribute to the increase in performance.

Target Price (RMB): 21.11

Researcher Zhu Jun

SAC No. S0570520040004 zhujun016731@htsc.comSFC No. BPX711 + (86) 10 6321 1166

Researcher Wu Jun

SAC No. S0570523100001 wujun023190@htsc.com + (86) 755 8249 2388

basic data

Target Price (RMB) 21.11

Closing price (RMB as of April 26) 18.15

Market Capitalization (RMB million) 3,609

6-month average daily turnover (RMB million) 194.93

52-week price range (RMB) 13.10-56.19

BVPS (RMB) 9.22

Stock price chart

Shanghai-Shenzhen 300

20

(3)

(27)

(50)

(73)

Apr-23 Aug-23 Dec-23 Apr-24

Source: Wind

The decline in gross margin was mainly due to changes in the revenue structure. The company's gross profit margin was 48.37% in 2023, yoy-5.61 pct, mainly due to the rapid growth in revenue from innovative businesses with lower gross profit margins. The cost rate for the period was 41.89%, yoy-1.30pct, of which sales expenses ratio was 18.55%, yoy-1.10pct; management expenses ratio 12.49%, yoy+0.25pct; R&D expenses rate 11.32%, yoy-0.34pct. 24Q1 gross profit margin 42.28%, yoy-7.14pct; 24Q1 period expense ratio 45.67%, yoy-2.95pct, of which sales expense ratio is 17.42%, yoy-3.26pct; management expense ratio 14.41%, yoy-0.51 pct; R&D expense ratio 14.21%, yoy+1.47pct.

Accelerate the implementation of the AIGC multi-scenario application. The “Small Value AI Shopping Assistant” was launched 23 years ago. Based on this, the company independently developed a large model worth buying and spending, and launched a series of applications such as “AI review robots”, “AI purchase suggestions”, and “ZDM-Copilot Creator Tool” within the “What's Worth Buying” app. In February 2024, the new feature “Small Value AI Shopping Assistant” was launched. It is expected that subsequent AI will continue to empower the company's business in terms of cost reduction and efficiency and innovative growth.

Risk warning: GMV growth falls short of expectations, e-commerce industry policy risks, AI investment and transformation fall short of expectations, increase in purchasing volume costs, etc.