occurrences
On August 20, 2024, the company released its 2024 semi-annual report. In the first half of 2024, the company achieved operating income of 0.407 billion yuan, a year-on-year increase of 100.42%; net profit to mother was 19.9246 million yuan, a year-on-year decrease of 9.80%; net profit after deducting non-return to mother was 18.4164 million yuan, an increase of 34.30% year-on-year.
reviews
Revenue from the digital integrated marketing and performance marketing business increased rapidly, and gross margin declined. The company's brand management and strategic consulting business grew steadily, and cooperation with major customers remained stable.
The digital integrated marketing and performance marketing business expanded rapidly, and two new joint ventures, Ingame Interactive and Insight, expanded overseas information distribution business. 24H1 digital integrated marketing revenue increased 55% year over year, and effect marketing revenue increased nearly 700% year over year, which is the main driver of the company's 24H1 revenue increase. Due to the increase in the share of performance marketing business, the company's overall gross margin declined. In terms of expenses, sales expenses and management expenses were basically stable. R&D investment increased by 91.42% year-on-year, mainly due to the company's continuous increase in research and development efforts in AI and other technologies.
Overall, the company's business is showing a rapid expansion trend. Combined with the equity incentive performance assessment target for the past three years (net profit for 24/25/26 increased by no less than 10%/50%/100% compared to 23), the company's profitability is expected to continue to increase.
The AIGC marketing application model continues to be implemented, and new businesses such as skits are being actively deployed. The company continues to explore AIGC technology implementation scenarios, and is equipped with an artificial intelligence marketing technology R&D team of about 30 people, covering key positions such as R&D engineers, data analysis, and product managers. Currently, the company has launched multi-modal AI applications such as Wensheng copywriting, Wensheng images, Wensheng audio, smart video cutting, Tusheng video, and Wensheng video, and uses Wensheng video to enable the creation and production of skits. At the same time, the company gradually covered key links such as content side, production side, IP side, distribution end and monetization side of short dramas, successfully produced many short dramas with different themes, and produced many customized short dramas for brands such as Tencent Games, Meizu, Touring, and iQOO. Combining the company's own accumulation of marketing creative planning capabilities, the support of AIGC technology, and the layout of the entire short drama industry chain, the company is expected to continue to enrich the content ecosystem, innovate customer service methods, and achieve the upgrading of marketing service capabilities across the ages in the future.
Investment advice:
We expect the company to achieve operating income of 1.204/1.833/2.253 billion yuan in 24-26, net profit of 0.047/0.056/0.066 billion yuan, and corresponding EPS of 0.43/0.51/0.60 yuan. According to the closing price on August 29, 2024, 24-26 will correspond to 94/78/66 times PE, respectively, covering for the first time, giving a “gain” rating.
Risk warning:
Risk of macroeconomic fluctuations; risk of technological iteration; risk of increased market competition; risk of loss of talent team; policy risk.