Incidents:
On April 24, 2024, EasyDianworld announced the 2023 Annual Report and 2024 Quarterly Report:
(1) 2023 revenue of 2.143 billion yuan (YOY -7.04%), net profit due to mother of 217 million yuan (YOY -17.2%), net profit of non-return to mother 167 million yuan (YOY -27.21%).
(2) 2024Q1 revenue of 481 million yuan (YOY +1.66%), net profit of 50 million yuan (YOY +21.23%), net profit not attributable to mother of 47 million yuan (YOY +26.73%).
(3) In 2023, it is proposed to distribute a discovery dividend of 1.1 yuan for every 10 shares, for a total dividend of 52 million yuan, with a dividend rate of 23.9%.
Investment highlights:
After excluding exchange gains and losses, results recovered in 2023, and 2024Q1 growth exceeded expectations.
(1) 2023 revenue of $2.143 billion (YOY -7.04%), net profit to mother of $217 million (YOY -17.2%), net profit after deducting non-return to mother of $167 million (YOY -27.21%), mainly affected by fluctuations in the RMB exchange rate against the US dollar and payment fees for equity incentive shares. Net profit attributable to mother before net profit and loss on exchange and share payments in 2023 was $212 million (YOY +8.99%). Non-recurring profit and loss of RMB 50.28 million in 2023 (RMB 33.1 million in 2022), mainly government subsidies of RMB 44.12 million.
(2) The gross profit margin for 2023 was 24.36% (up 3.99 pct year on year); the cost ratio for the period was 10.78%, up 2.6 pct year on year. Among them, the financial expense ratio increased by 1.52 pct year on year, mainly due to a decrease of 67.97 million yuan in net exchange income.
(3) 2024Q1 revenue of 481 million yuan (YOY +1.66%), net profit due to mother of 50 million yuan (YOY +21.23%), net profit of non-return to mother of 47 million yuan (YOY +26.73%); net profit returned to mother after excluding exchange gains and loss and share payments of 64 million yuan (YOY +38.75%), mainly due to significant increase in profitability due to technology investment and product development.
The main business is steady, and AI helps improve marketing efficiency.
(1) In 2023, performance advertising achieved revenue of 2,028 billion yuan (YOY -6.84%), accounting for 94.64% (up 0.2 pct year on year), gross profit margin of 20.80% (up 4.57pct year on year); advertising sales agency services of 109 million yuan (YOY -11.45%); revenue from Hong Kong, Macao, Taiwan and overseas accounted for about 87.5% (up 2.63 pct year on year). The company has accumulated diverse media resources, stable and in-depth cooperation with leading media such as Google, Meta, and Tiktok; and has accumulated resources from e-commerce categories such as Alibaba and Shein, and game and entertainment advertisers such as Miha. The number of direct/agency customers increased by 51/110 year-on-year in 2023. Advertisers from the e-commerce industry had revenue of 491 million yuan (YOY -54.27%), and app, entertainment agencies and other industries had revenue of 1,646 billion yuan (YOY +34.25%).
(2) In 2023, the AIGC digital marketing creation platform “KreadOAI” was launched to provide four major solutions for AI digital people, AI models, AI tools, and AI creative assets. It has now been applied in the fields of business travel recommendations, e-commerce shopping, education and training, covering 203 countries, with more than 1 million registered users, more than 1 million monthly user visits, and an average monthly payment/renewal rate growth rate of about 20%/50%.
Profit forecast and investment rating: In 2024-2026, we expect the company's revenue to be 25.92/30.24/3.365 billion yuan, net profit to mother of 3.01/3.61 billion yuan, EPS of 0.64/0.76/0.87 yuan, and corresponding PE of 27.02/22.52/19.72X. As a leading overseas marketing service provider, the company has clarified the new strategy of “leading the new wave of brands going overseas with AIGC”, and is optimistic about the company's development potential. Based on this, the first coverage gave the company a “buy” rating.
Risk warning: Risks such as increased market competition, downward valuation center, rising media resource procurement costs, falling short of expectations in customer development, falling short of expectations for advertisers, risk of credit impairment, falling short of expectations in new business development, and falling short of expectations in AI technology evolution.