Incidents:
On July 11, 2024, Meituan Takeout Partner City released the latest investment consultation, stating that currently Meituan is planning to recruit elevator media advertising franchisees (video elevator media) in the sinking city. Faced with stock price fluctuations caused by investment inquiries, FanZhong Media immediately responded on the Interactive Easy platform. It has a cooperative relationship with Meituan and will work together to promote elevator video media operation cooperation in low-tier cities.
Opinions:
The social economy is stable and improving, and advertisers have rekindled their enthusiasm for marketing and promotion. As the economy developed, the advertising market began to recover, and advertisers' demand increased. In recent years, China's GDP has been increasing steadily year by year. In 2023, China's GDP reached 12,6058.21 billion yuan, an increase of 5.2% over the previous year.
Total retail sales of consumer goods have also increased. With the end of the epidemic and the improvement of the macroeconomic environment of society, the enthusiasm of advertisers to invest in marketing and promotion has been rekindled. According to CTR data, advertising market spending increased 11.20% year-on-year in the same period in 2021, and overall advertising market spending increased 6.00% year-on-year in the same period in 2023.
The ladder media business has led the development of the advertising market and has become one of the pillars of the market. According to the 2022 “White Paper on Chinese Brand Advertising and Marketing Strategy”, the reach rate of building media was 82.28%, and the reach time was mainly focused on traveling and commuting to work. The ladder media market has broad market prospects and development potential. According to CTR data, in 2022 and 2023, only elevator LCDs and elevator posters changed year-on-year for two consecutive years.
A leader in the advertising and marketing industry, deeply trusted by customers. As one of the earliest companies to create an elevator media advertising model in China, the company is currently actively developing market share as a leading enterprise in the building media advertising industry. In 2019-2023, the number of the company's equipment increased dramatically, fully seizing the market share of Tier 1 and 2 cities. The proportion of the company's old customers is higher than 85%, and actively seeking cooperation with new customers will bring flexibility to the company's performance. In terms of major customer retention, the 100 million yuan customer retention rate is as high as 90%, enabling the company's performance to maintain steady growth.
Profit forecast and investment rating: We expect the company's revenue for 2024-2026 to be 12.868 billion yuan, 13.794 billion yuan, and 14.622 billion yuan. Net profit attributable to mother was 4.873 billion yuan, 5.233 billion yuan, and 5.879 billion yuan. The current stock price corresponding to 2024-2026 PE is 19.6/18.3/16.3 times, respectively. Referring to the comparable company Blue Cursor, Zhaoxun Media, and Zhejiang Internet, we are optimistic about the steady growth of the company's main business and active layout of overseas markets to maintain a “buy” rating. Core Assumptions: (1) Building Media: As a leading enterprise in building media advertising, this business accounts for the largest share of the company's revenue. Revenue: Due to high advertising demand and the continuous expansion of new businesses, it is expected to bring room for growth for the company. We expect the revenue growth rate of the building media business to be 8%/7%/6% from 2024 to 2026, respectively. The cost of building media business in 2024-2026 is 3.949 billion yuan/4.015 billion/ 4.127 billion yuan respectively. Affected by site expansion, the company's gross margin for 2024-2026 is expected to be 67%/69%/70%, respectively. (2) Cinema media: As of March 31, 2024, the company's cinema media cooperated with 1,831 cinemas, about 0.013 million cinemas, and the company has a leading market share in cinema advertising media. Revenue: Benefiting from macroeconomic recovery and rising market demand, we expect the cinema media business revenue growth rate to be 13%/12%/6% from 2024 to 2026, respectively. The cost of cinema media business from 2024 to 2026 is 0.342 billion yuan/0.372 billion/ 0.374 billion yuan, respectively, and the gross margin of cinema media business is expected to be 61%/62%/64% in 2024 to 2026, respectively.
Risk warning: New technology development falls short of expectations; industry competition intensifies; new product development, launch and performance fall short of expectations; advertisers' delivery falls short of expectations; and the policy and regulatory environment is getting stricter.