The year-on-year growth rate of advertising revenue has slowed down due to internal and external factors: the weak performance of external consumer end affects the advertising budget of advertisers; and internally, there is pressure on the growth rate in 2Q24 after the low base effect.
Futu Securities learned from the Zhixin Finance & Economics APP that China International Capital Corporation (CICC) has released a research report stating that the year-on-year growth rate of advertising revenue for listed companies in the second quarter has slowed down overall, and the outlook for 3Q24 and the second half of the year is cautious. The year-on-year growth rate has slowed down due to internal and external factors: the weak performance of the external consumer end affecting the advertising budget; and internally, there is pressure on the growth rate in 2Q24 after the low base effect. The allocation of advertising budgets by advertisers has not changed significantly, and the leading growth rate is still for transaction-oriented advertising. In addition, in terms of offline media, the team has observed a rebound in advertisers' attention to offline traffic. It is recommended to pay attention to the operating conditions of upstream advertisers, the budget increment in segmented areas and benefiting media, as well as the changes in the budget acquisition capability of various advertising media.
The year-on-year growth rate of advertising revenue for listed companies in 2Q24 shows a slowing trend. China International Capital Corporation (CICC) judges that the year-on-year growth rate has slowed down due to internal and external factors. The weak performance of the external consumer end affects the advertising budget, and in the second quarter, the demand for advertising is more oriented towards the '618' e-commerce promotion, reflecting the weak consumer momentum in 2024's '618' data, which in turn has weakened the year-on-year growth rate of advertising revenue in 2Q24. Internally, there is pressure on the growth rate in 2Q24 after the low base effect. Companies like Tencent, BlueFocus, achieved good year-on-year growth rates under a low base in 2Q23 and 1Q24. Although the year-on-year growth rate in 2Q24 has slowed down, the absolute growth momentum of advertising business income is good.
The allocation of advertising budgets by advertisers has not changed significantly, and the leading companies in year-on-year growth rate of advertising business income in 2Q24 are Bilibili (+29.5% YoY), PDD Holdings (+29.5% YoY), BlueFocus Intelligent Communications Group (+23.4% YoY), and Kuaishou (+22.1% YoY), as judged by CICC to be all driven by performance-based advertising. Meanwhile, the revenue performance of online brand advertising such as Weibo has been flat. In terms of offline media, CICC has observed an increase in advertisers' attention to offline traffic, with leading media having budget acquisition advantages. Focus Media achieved a 10.0% year-on-year growth in revenue in 2Q24.
The overall expectation for the second half of the year is cautious. It is recommended to pay attention to the consumption performance at key time points, the budget increment in certain segmented areas, and the budget competition capability changes of advertising media. CICC, based on the company's earnings conference statements and consistent with Bloomberg's expectations, judges that the current market maintains a relatively cautious expectation for the advertising business in 2H24. Looking ahead, CICC believes that from the external macro environment level, attention can first be combined with key time points to observe changes in consumer and advertising budget, such as the good increase in advertising for beverages and sports shoes during 3Q24's Olympics, subsequent attention to Mid-Autumn Festival, National Day, and 'Singles' Day' and other key time points.
Valuation and Recommendations
Maintain coverage company rating, profit forecast and target price.
Key recommendations include Focus Media Information Technology (002027.SZ, attractive dividend return, focusing on macroeconomic recovery and subsequent performance of consumer advertising), Kuaishou (01024, relatively stable competitive landscape, strong profit release), paying attention to Mango Excellent Media (300413.SZ, strong content performance with potential accelerated recovery or improvement in advertising margins), and Bilibili (09626, BILI.US, continuous improvement in commercial efficiency, rapid growth in advertising revenue).
Risk
Economic downturn dragging down advertisers' willingness to invest, industry competition intensifying, regulatory policy changes.