Description of the event

The company announced its 2024 semi-annual report: the first half of 2024 achieved operating income of 1.912 billion yuan, a year-on-year decrease of 12.82%; realized net profit attributable to the parent company was 0.13 billion yuan, a year-on-year decrease of 40.13%; of these, 2024Q2 achieved operating income of 0.976 billion yuan, a year-on-year decrease of 22.71%, and realized a net profit attributable to the parent company of 0.081 billion yuan, an increase of 6.93% year on year.

Incident comments

Reduced investment by automobile customers dragged down revenue, investment income, etc., boosted profit growth in the second quarter of a single quarter. Macroeconomic uncertainty has led to a reduction in investment in the majority of automobile customers, and revenue declined; gross margin was relatively stable and remained high at around 20% in 24Q2. 24H1 management expenses increased 19.10% year-on-year due to personnel optimization, and financial expenses were drastically reduced by 62.55% due to an increase in interest recovery income. The company actively invested abroad, and both investment income and asset disposal income increased sharply compared to the same period last year, boosting profit growth in the second quarter of a year.

Focus on the advertiser industry and consolidate core competitiveness. Facing the complex market environment, the company deeply cultivated the stock market and optimized integrated resources. During the reporting period, the company carried out advertising and brand communication business services for Erie, China Resources Group, China Mobile, JD Mall and leading automobile customers SAIC-GM Buick, FAW Toyota, Jihu, Rantu, Dongfeng Honda, FAW Audi, Dongfeng Passenger Vehicle, FAW-Volkswagen; during the Olympics, it also used innovative communication channels and strategies to accurately grasp target users and launch Olympic-themed advertisements for customers such as Erie, China Resources Yibao, and China Radio and Television.

Entered the sports lottery business and achieved good sales performance. National lottery ticket sales in the first half of 2024 totaled 308.478 billion yuan, an increase of 12.6% over the previous year, mainly driven by the European Cup. The rapid growth in lottery ticket sales was mainly driven by the European Cup. The company reached a strategic cooperation with Hesheng Creative Development Group in April '24 to jointly promote the sports lottery business. The company will use its professional advantages in the field of digital marketing, combined with high-quality customer resources and national layout, to actively expand sports lottery outlets in commercial complexes, shopping centers and other channels such as China Resources Group, promote the development of sports lottery business through “IP co-branding” and other forms, and explore innovative sports lottery businesses.

Launch “one” AI multi-modal product and continue technological innovation. On the one hand, the company pioneered the launch of a multi-modal AI product in the marketing field: “One” AI, which aims to intelligently provide advertisers with full-process marketing services including early marketing strategies, mid-term creative output, and post-intelligent delivery; on the other hand, it uses AIGC tools such as ChatGPT and Shopify to continuously improve AI creative capabilities, fully combining existing customer resource endowments, marketing methodological advantages, full-chain marketing data, and AI technology to provide more efficient marketing services and products.

Profit expectations: Net profit due to mother is expected to be 0.502 billion/0.653 billion yuan in 2024-2025, corresponding PE is 10.63/8.17X, respectively, maintaining a “buy” rating.

Risk warning

1. Advertisement repair falls short of the expected risk;

2. The risk of launching a new business falls short of expectations.