Focus Media has built the largest urban lifestyle media network in China, with scarce offline traffic coverage in core cities.
As of the end of March 2024, the company's self-operated elevator media (TV and poster) resources amounted to 2.623 million blocks, covering 99 major cities in China, the Hong Kong Special Administrative Region, and 95 major cities in South Korea, Indonesia, Thailand, Singapore, Malaysia, Vietnam, India and Japan; in addition, the company joined the elevator media resources totaling 0.455 million blocks. The company created the core scenario of “building media” to cover mainstream people to form low-interference high-frequency contact. Furthermore, as of the end of March 2024, the company's cinema media cooperated with 1,831 cinemas, about 0.013 million cinemas, covering moviegoers in 271 cities in China. In 2024, we expect that the company's domestic media resources will increase slightly, and the number of overseas resources is expected to show a relatively high increase.
The company's total revenue is positively related to GDP but is more resilient, with strong investment performance in consumer goods, transportation, communications and other industries. In 2023, the company's total revenue was 11.9 billion yuan (YoY +26.3%), net profit attributable to mother was 4.83 billion yuan (YoY +73.2%), net non-return profit of 4.37 billion yuan (YoY +82.7%), and net cash flow from operating activities was 7.68 billion yuan (YoY +14.6%); a total cash dividend of 4.77 billion yuan was distributed, accounting for 98.8% of net mother ratio. Looking at the marketing industry: In 2023, daily consumption, internet, transportation, entertainment and leisure, and communications were the top five industries. The year-on-year growth rate was 29%, 26%, 44%, 30%, and 148%, respectively. The investment scale accounted for 56.2%, 11.8%, 7.3%, 6.9%, and 5.1% of total revenue, respectively. The consumer goods, transportation, and communications industries are growing at the highest rate of investment. We believe that the company has high-quality customers in the Japanese consumer industry to enter the basic market. At the same time, at different stages of development, it will continue to benefit from the rise of new industries or industrial transformation, and focus on the growth of technology consumption and new energy vehicle segments.
Technologies such as LBS and AI enable advertising and the second curve of overseas marketing. In January 2021, the “Direct Investment” applet was upgraded and launched, which has the characteristics of low delivery threshold, accurate LBS selection, targeting of target business districts and buildings, smart screen system promotion, and real traffic monitoring; in March 2021, the “Feilai Red Envelope” applet was launched, using a B2B2C operation model to help merchants distribute various discount cards and benefits products; in August 2022, the “Maker Post” function was added to provide free advertising content ideas to small and medium-sized customers; in July 2023, AI intelligent creative exploration and upgrade, and AI empowered Creative production, through AI technology, provides AI copywriting, image and video services, and provides one-stop 4A level marketing services. Since 2017, the company has developed overseas media business through holding or joint ventures. As of the end of March 2024, the number of overseas ladders was 0.172 million blocks. In response to the country's “Belt and Road” initiative, the second curve of the company's development was established.
Profit forecast and valuation: We expect the company's 2024-2026 corresponding fully diluted EPS to be 0.37 yuan, 0.41 yuan, and 0.46 yuan per share, respectively. Referring to the comparable company's 2024 PE valuation, we gave the company a 24-28 PE valuation in 2024, corresponding to a reasonable value range of 8.88-10.36 yuan/share, and gave it a “superior to the market” rating.
Risk warning: The macroeconomic growth rate falls short of expectations, advertising in some segments falls short of expectations, and market competition in the media industry intensifies.