Key points of investment:
AIGC is a leading overseas marketing leader, helping to build 1,000 global brands and serve 100,000 corporate customers.
In 2023, the company's total revenue was 2.14 billion yuan (-7.0% YoY), of which overseas business revenue was 1.88 billion yuan, accounting for 87.5% of total revenue; net profit attributable to mother was 220 million yuan (-17.2% YoY), net profit after deduction of non-return mother net profit of 170 million yuan (-27.2% YoY), and net profit attributable to mother (+143.4% YoY), excluding exchange gains and loss and net profit attributable to mother of shares of 150 million yuan (+174.2% YoY); net cash flow from operating activities was 150 million yuan (+174.2% YoY). 2024Q1, the company's total revenue was 480 million yuan (+1.7% YoY), net profit attributable to mother was 5.09 million yuan (+21.2% YoY), net profit not attributable to mother was 46.83 million yuan (26.7%), net profit attributable to mother excluding exchange gains and losses and share payments of 64.33 million yuan (+38.75% YoY).
The company launched the first AIGC digital marketing creation platform, built a full-link tracking big data platform, and realized the construction of a systematic marketing product system. In 2023, the company's revenue from performance advertising and marketing services was 2.03 billion yuan (-6.8% YoY), accounting for 94.6% of total revenue, with a gross profit margin of 20.8% (+4.6pct); advertising sales agency service revenue was 110 million yuan (-11.5% YoY), accounting for 5.1% of total revenue. The company has effective coverage with global leading media traffic as well as medium- and long-tail media traffic. The main partners include leading media such as Google, Microsoft, Apple Ads, Meta, Massive Engine, Tik Tok for Business, and other medium- and long-tail media such as Xiaomi, Meitu Xiuxiu, and Voice. The company continues to strengthen the advantages of Internet advertising technology. In 2023, it was the first to access general models including GPT-4, StableDiffusion, Midjourney, Wenxin, and Tongyi Qianwen, to carry out AI transformation of the company's internal technology platform and effectively improve advertising efficiency for e-commerce customers; in July 2023, the company released the first AIGC digital marketing creation platform KreadOAI, based on the four major solutions of “AI digital people, AI models, AI tools, and AI creative assets” Global users provide AI+ multi-scenario solutions, which have been applied in the fields of business travel recommendations, e-commerce shopping, application downloads, education and training, and corporate services. It has covered 203 countries around the world, with more than 1 million registered users and more than 1 million monthly user visits.
Global multi-level and multi-industry customer base coverage. In 2023, the company's e-commerce industry invested 490 million yuan in revenue (-54.3% year on year), accounting for 22.9% of total revenue (-23.7 pct year on year), and application, entertainment agents and other customers invested 1.65 billion yuan in revenue (+34.3% year on year), accounting for 76.8% of total revenue (+23.6 pct year on year). In terms of e-commerce, the company can fully enjoy the overseas marketing dividends of leading e-commerce platforms and brand customers. Alibaba, Detailed, Shein, and Shopee are all the company's e-commerce customers. In 2023, the company helped the company go overseas for the second time, expand the new Infinix Note series in the Southeast Asian market, and help LeGe, a leading Chinese smart home company, market and launch in the US, Japan, Australia, etc.; at the same time, along with China's cross-border e-commerce “Four Little Dragons” SHEIN, Temu, TikTok Shop and Aliexpress's rapid rise in many markets around the world has driven a large number of industrial sellers into the overseas market and rapidly developed into a cross-border export e-commerce cluster. The company is expected to take advantage of “Made in China” to actively expand customer coverage. In addition, the company actively serves customers in video, games, skits and other industries. In 2023, skits became a new market. The company used its accumulated experience of “Internet Writing Overseas” to help the Chinese Online skit app ReelShort and Dreame, a casual reading app for women, successfully expand overseas markets.
Profit forecast and valuation: We estimate that 1) In 2024-2026, the company's top traffic media advertising revenue growth rates will be 10%, 8%, and 8%, respectively, accounting for 65%, 62%, and 60% of performance advertising revenue, respectively, then the company's performance advertising revenue in 2024-2026 will be 2.33 billion yuan, 2.64 billion yuan and 2.95 billion yuan respectively, with year-on-year growth rates of 15.1%, 13.2%, and 11.6%, respectively; 2) In 2024-2026, the company's advertising sales agency service revenue will decline by 8%, 5%, and 3, respectively %
Overall, we expect the company's total revenue for 2024-2026 to be 2.44 billion yuan, 2.74 billion yuan and 3.05 billion yuan, respectively, with year-on-year growth rates of 13.8%, 12.5% and 11.1%; net profit to mother of 298 million yuan, 374 million yuan and 439 million yuan respectively, with year-on-year growth rates of 37.2%, 25.6% and 17.3% respectively; corresponding fully diluted EPS of 0.63 yuan, 0.79 yuan and 0.93 yuan respectively. Referring to the comparable company's 2024 PE valuation, we gave the company a 2024 30-35 times PE valuation, corresponding to a reasonable value range of 18.90-22.05 yuan/share, and gave it a “superior to the market” rating.
Risk warning: Risk of changes in the market environment and policies in overseas countries, and the progress of industry customers going overseas falls short of expectations.