Brief performance review
On August 22, 2024, the company disclosed the results announcement for the second quarter of 2024. In 2024Q2, revenue was 6.127 billion yuan, +16% year-on-year, and non-Gaap net loss to mother was 0.271 billion yuan, a year-on-year decrease of 72%.
Management analysis
The number of users and video views grew healthily, and UP revenue increased. In 2024Q2, the average daily active users of the company were 0.1023 billion, an increase of 6% over the previous year. The average daily usage time of users was 99 minutes, an increase of 5 minutes over the previous year. In 2024Q2, the company's average video broadcast volume reached 4.8 billion, an increase of 18% over the previous year. In addition to traditional categories such as games, technology, and knowledge, the broadcast volume of content with more commercial potential, such as furniture, real estate, automobiles, and fashion, also achieved good growth. 2024H1, B station UP owners earned more than 30% year-on-year in revenue from advertising and value-added services.
The launch of new games has driven the game business to resume growth, and advertising products continue to be optimized. 2024Q2:1) The company's advertising revenue was 2.037 billion yuan, +30% year-on-year. The company continues to upgrade product infrastructure such as advertising distribution, advertising materials, delivery tools, and business data. E-commerce adheres to the Grand Open Loop Strategy, bringing in more than 50% of new customers to all vertical industries during the 618 period. 2) Revenue from value-added services was 2.566 billion yuan, up 11% year on year, and the number of 2024Q2 company members reached 22.3 million, an increase of 2% over the previous year. 3) Game revenue was 1.007 billion yuan, up 13% year on year. The company's SLG game “Three Kingdoms: Designing the World” was launched on June 13 and ranked in the top 5 iOS game bestsellers for 21 consecutive days. The game contributed limited to Q2 performance, and is expected to grow strongly in the next quarter. 4) Revenue from IP derivatives and other businesses was 0.516 billion yuan, a decrease of 4% year-on-year.
Gross margin continued to be optimized month-on-month to maintain positive operating cash flow. The share of the company's high-margin business increased, and operating leverage continued to be released. In 2024Q2, the company's gross margin reached 29.9%, +6.78 pct year-on-year, and +1.58 pct month-on-month. 2024Q2 company's marketing expenses were 1.036 billion yuan, marketing expense ratio 16.9%, year-on-year -0.41 pct, month-on-month; management expenses 0.488 billion yuan, management expense ratio 7.97%, -2.21pct, month-on-month +1.42pct; R&D expenses: 0.895 billion yuan, management expense ratio 14.6%, -5.14 pct, month-on-month; operating cash flow 1.75 billion yuan, compared with the same period last year Correction.
Profit Forecasts, Valuations, and Ratings
The company is expected to generate revenue of 26.6/30.4/33.8 billion yuan in 2024/2025/2026, NON-GAAP net profit of -0.015/2.031/3.285 billion yuan respectively, and the current stock price corresponding to 2025/2026 P/E is 20.20/12.49X, respectively, maintaining a “buy” rating.
Risk warning
User growth falls short of expectations; advertisers' demand falls short of expectations; quality upgrade mainstream risk; game launch time or performance falls short of expectations.