Research framework: We will abstract the core contradiction affecting fluctuations in audience performance as two curves of supply and demand: (1) Advertisers' advertising demand (demand curve) dominates revenue trends, and the macroeconomic cycle determines the overall advertising demand. Central industry trends and advertising media share transfers are two major forces that change the demand curve, but they can only provide α for revenue changes, making it difficult to change overall revenue beta; (2) the number of media resource points (supply curve) affects costs. Media rental costs, personnel costs, and equipment depreciation costs make up the most important costs, all of which are directly related to the pace of point expansion. Short-term industry competition intensifies, leading to a rapid expansion in the number of points (shift in the supply curve) and a significant increase in overall costs. Revenue releases lag behind costs, amplifying short-term performance fluctuations. The orderly expansion of high-quality points does not directly affect short-term revenue, but rather supports the company to surpass the high performance point of the previous cycle when the next round of macroeconomic cycles is upward. The profit side ultimately presents the comprehensive results of demand and supply curves. Macro factors may also affect credit impairment losses, investment returns, etc., further amplifying profit fluctuations.
Demand curve: In the current macroeconomic recovery cycle, AI is expected to contribute 5-10% structural growth in the short term, and is expected to continue to increase in the long term. Currently, the domestic macroeconomic environment is recovering steadily, and related stimulus policies continue to increase. It is recommended to pay close attention to high-frequency macroeconomic data, which is highly indicative of the direction of income changes in the short term. Reviewing the experience of online education and the rise of new consumption, the growth rate of industry scale and financing conditions are prerequisites for increasing advertising in emerging industries. Currently, the domestic AI industry chain is booming, financing from leading companies is growing rapidly, and demand for new advertising has already been initially realized in financial reports. We expect that there is still room for further improvement in the revenue growth we can contribute to the company. In the current context of the advertising reduction market, Ladder Media has received a certain advertising share bias, leading to a structural increase in volume, but prices and publication rates may still be affected by the actual release of demand at the macro level.
Supply curve: Overall, steady and orderly growth has been maintained, and the expansion of domestic smart screens and overseas points has provided room for point growth. We judge whether there should be another aggressive expansion cycle in the market, mainly based on three aspects: the overall financing environment in the market is tightening, the trendy profit model has not worked and is misplaced in competition with the crowd, and marginal improvement in the competitive pattern of the tiered media market. In the medium to long term, smart screens in domestic communities may provide more room for growth, but they may compete with the latest trends; there is still room for improvement in the number of points covered by overseas cities and single cities, and there is room for growth in overseas locations.
Profit forecast and investment rating: The company's 24-26 revenue is estimated to be 127, 134, and 13.9 billion yuan, and net profit of 5.2 billion yuan, 56 billion yuan, and 5.9 billion yuan. Corresponding PE is 16x, 15x, and 14x, respectively. Based on the company's stable business model, stable industry position, and deep commercial barriers, it maintains a “recommended” rating.
Risk warning: Consumption recovery falls short of expectations, customer willingness to invest is insufficient, and customer industry regulations are becoming stricter.