occurrences

The company released its 24Q2 financial report. 24Q2's total revenue was 6.13 billion yuan (YoY +15.5%), slightly higher than Bloomberg's agreed estimate of 6.09 billion yuan (YoY +14.9%); 24Q2 adjusted net loss to mother was 0.27 billion yuan, higher than Bloomberg's agreed expectation of 0.33 billion loss. The loss narrowed 71.8% year-on-year, and is expected to achieve the 24Q3 adjusted operating profit profit target.

Traffic side: The number of users fell slightly short of expectations, and the usage time continued to increase. User side: 24Q2's MAU reached 0.336 billion (YoY +3.7%), slightly lower than Bloomberg's 0.343 billion (YoY +5.8%); DAU reached 0.102 billion (YoY +6.0%), slightly lower than Bloomberg's expected 0.1045 billion (YoY +8.3%); the average daily usage time of a single DAU was 99 minutes (YoY + +) 5.3%).

Q2 Average daily video views reached 4.8 billion, up 18% year over year.

Creators' side: In the first half of 2024, about 2.1 million content creators received revenue on Site B, and the total revenue generated by content creators through advertising and value-added service products increased 30% year over year.

Advertising business: continuous traffic growth+continuous release of user commercial value+1 vertical N horizontal strategy helps advertising business grow rapidly

24Q2's advertising revenue reached 2.04 billion yuan (YoY +29.5%), higher than Bloomberg's agreed estimate of 1.99 billion yuan (YoY +27.0%). The rapid growth of the advertising business is due to:

1) Continued growth in platform traffic: Q2 DAU increased 6% year over year, and video playback volume increased 18% year over year, which means that the commercial traffic base continues to grow.

2) Continued release of user commercial value: The average age of users at Station B is 25 years old. They are in a stage of rapid growth in consumer demand and consumption capacity. In Q2, video broadcasts in furniture, real estate, automobiles, fashion and beauty categories increased by more than 30% year on year, and the number of videos in the mother and child category increased by more than 80% year on year.

3) 1. Vertical N horizontal strategy: One horizontal refers to the infrastructure of the advertising business. In the first half of the year, the company provided a one-stop professional advertising tool for the PC platform, and the number of advertisers increased by 50% in the first half of the year; N vertical industry solutions. The top five advertiser industries in the vertical industry Q2 were games, e-commerce, digital appliances, food and beverage, and automobiles. Among them, e-commerce and digital home appliances were the two biggest driving forces for Q2 advertising growth. This year, 618 e-commerce customers increased 300% year-on-year, and GMV with delivery increased by more than 100 percent year-on-year. % brought a 50% new customer rate to businesses, of which the mother and child parent-child industry had a new customer rate of over 70%.

Game business: “Three Kingdoms: Designing the World” data showed excellent performance. The game business returned positive growth in 24Q2 and the mobile game business revenue was 1.01 billion yuan (YoY +13.0%), higher than Bloomberg's consensus estimate of 0.96 billion yuan (YoY +7.2%).

“Three Kingdoms: Designing the World” attracted millions of downloads in its first week. At the beginning of its launch, it reached the top three iOS bestsellers, and remained in the top ten iOS bestsellers in the first month. It was the fastest game in the history of Station B to reach 1 billion traffic. In the future, Station B will turn it into a boutique game that can continue to operate for more than 5 years, and continue to operate “Three Kingdoms: Designing the World” for a long time.

Value-added service business: the number of members and paying users is growing steadily

24Q2 value-added services revenue was 2.57 billion yuan (YoY +11.5%), lower than Bloomberg's forecast of 2.65 billion yuan (YoY +15.1%)

By the end of June 2024, Station B had 22.3 million members (YoY +9%), of which more than 80% were annual subscribers or automatically renewed packages, indicating that users' loyalty and trust in Site B continues to grow.

In addition, users are also increasingly inclined to spend money on other value-added service products on Station B, including high-quality online courses, fan fee plans, and avatar decorations. The average number of monthly paying users was nearly 29 million in 24Q2.

Investment advice

The company is expected to achieve revenue of 26.24/29.29/32.11 billion in 24/25/26, achieve adjusted net profit to mother - 0.024/2.034/3.057 billion, and maintain a “buy” rating.

Risk warning

Competition in the Internet content industry intensifies; commercialization falls short of expectations; user growth falls short of expectations; content quality falls short of expectations, etc.