Performance review for the first half of 2024: Yeahka's revenue for the first half of 2024 was 1.6 billion yuan (RMB, same below), down 23% year on year, and adjusted net profit (excluding the impact of non-recurring revenue adjustments) fell 29% year on year to 0.16 billion yuan, mainly due to the decline in the scale of payment transactions.

The number of payment transactions remained stable year on year. The size of transactions was mainly affected by a decrease in the single amount, and transaction rates remained stable from month to month. The payment volume (GPV) /payment revenue for the first half of the year was 1.17 trillion yuan/1.3 billion yuan, down 18%/27% year on year. It was mainly affected by the high base and the decline in average order consumption, but the number of daily transactions peaked at 56.9 million yuan, which was the same as the previous year. Excluding the impact of non-recurring revenue adjustments, the payment rate remained stable at 0.123% month-on-month.

Business restructuring led to year-on-year optimization of gross margin of merchant solutions/in-store e-commerce businesses. Merchant solution revenue increased 21% year over year, with the number of active merchants increasing 5.8% year over year, merchant structure optimization led to average payment +15% year over year, and gross margin increased 3 percentage points to 91% year over year. In-store e-commerce focuses on profitable merchants, optimizes revenue structures through upfront charges, and continues to drive losses to narrow month-on-month.

Outlook: The company focuses on strengthening one-stop full-stack merchant services based on payments, improving its ability to serve merchants through AI technology construction, and replicating mainland product capabilities to accelerate overseas expansion. It is expected that there will be a marginal improvement in the single payment amount. The scale of payments may resume month-on-month growth in the second half of the year. Short-term payment rates may be relatively stable, and there is still room for improvement in rates driven by the volume of overseas payment services over the long term. We expect the company to pay 2.4 trillion yuan/2.8 billion yuan in GPV/revenue in 2024, respectively. The company continues to strengthen high-quality merchant services, and it is expected that merchant solutions with high gross margins will continue to grow rapidly due to merchant expansion and average payment increases.

Valuation: We switched our valuation to 2025, and fine-tuned the target price to HK$13 (previously HK$14), based on comparable payment and SaaS companies' price-earnings ratio of 14 times in 2025, maintaining a neutral rating. The company accelerated the expansion of overseas payments and merchant services. Singapore paid GPV +50% in the first half of the year. It is expected to maintain rapid growth in the second half of the year. The incremental revenue and profit contributions are expected to be gradually released, or become the company's next growth point.