Investment advice

Since this year, the macroeconomic environment has been quite complicated. Investors have some differences of opinion on the soundness and sustainability of advertisers' campaigns, and are also concerned about advertisers' attitude towards offline media such as mass media. We selected some typical advertisers to analyze how much they spend on sales channels and delivery channels, and have a small sample of partial discussions on advertisers' advertising behavior that can be traced from current public data. We believe that advertisers' demand for offline advertising is still relatively steady, and is focused on efficient media. The core values long-term brand construction and enhanced promotion effectiveness at special marketing points.

rationales

Mesoscopic logic: The online penetration of physical product sales is relatively slow, and further penetration corresponding to online advertising is also relatively limited. As a key venue and required media for offline brand advertising, Focus Media is still favored by advertisers in media selection and share allocation decisions for their budget.

Analysis of the types of advertisers broken down:

“Distribution” advertisers: We have sorted out advertisers that account for relatively high sales revenue from alcohol, beverages, etc.: 1) The advertising rate is relatively stable over a long period of time; 2) they have a high level of preference for offline and brand advertising. We think this is partly because their distribution model pays more attention to the impact of brand advertising exposure, radiation, etc. on benefits, and long-term continuous exposure promotes dealer purchasing behavior.

“Direct” advertisers: Let's sort out the advertisers with a high proportion of direct sales, such as beauty and personal care, and can be seen: 1) There is a steady upward trend in advertising rates for leading advertisers; 2) there is a clear increase in investment in offline and brand advertisements to match the big promotion period and new product promotion period, focusing on scaling up to drive online transformation.

Advertisers who focus on offline delivery scenarios: Good match with brand advertisements or offline advertisements. Typical advertisers include Huaqiang Fangte, Disney, etc. in the entertainment and leisure category.

Profit forecasting and valuation

Keep profit forecasts unchanged. The current share price corresponds to 19/18 times 2024/25 P/E. Maintaining an outperforming industry rating and target price of 9.2 yuan (corresponding 25/23 times 2024/25 P/E), with 32% upside.

Emphasis is placed on the attributes of mass media “attacking” (growth flexibility brought about by further restoration of consumption) and “defending” (steady demand for offline media with steady demand+dividend value).

risks

The macroeconomic recovery fell short of expectations, industry competition intensified, industry policy changes, advertisers' development progress was slow, and investment projects depreciated.