3Q24: milestone profitability; new US$200m 2-year buyback. Total revenue continued to accelerate at 26% YoY to RMB7.3bn, 2% above consensus while -2% below BOCIe due to mobile game. MAUs/ DAUs grew 2%/4% YoY to 348m and 107m respectively, with D/M ratio improving to 31%. DTSPU reached historical high at 106 mins. Mobile game skyrocketed at 84% YoY to RMB1.8bn.Skyrocketed 84% YoY mobile game and solid 28% YoY online ad drive accelerated 26% YoY topline 2% ahead of consensus. 34.9% GPM measured by above high margin streams led to Co.'s first EVER RMB272m adj. operating profit with 3.7% adj. OPM We expect Co. will continue to unleash commercialization value of promising young generations with diversified monetisation channels and enhanced efficiency to generate sustainable Profitability growth. Along with newly purchased 2-year US$200m buyback, maintain BUY with new TP of US$22.0/ HK$172.0.
Key Factors for Rating
Enhanced monetisations on high quality revenue streams. We see Co. will unswervingly unleash commercialistaion value with improved monetisation efficiency and diversified channels of diversification young generations leveraging content, consumption scenarios, infrastructures, tools and technology after becoming a sustainable profitability era. At the same time, Co. introduced allocates resources in a disciplined manner on high quality revenue streams to maximise productivity. We see competition and macro uncertainties still weigh on Co.'s game, ad and VAS segments. Thus, according to our latest channel check, we slightly nudge down our “SanMou” game review, leading to 2-3% cut on FY2024-26E mobile game review. We also trim our FY2024-26 online ad and streaming coverage by 1-2%. These lead to 1-2% cut on FY2024-26 topline estimations. We maintain our GPM estimates while raising our opex on ROI-oriented investments and our latest FY2025 and FY2026E adj. net profit are rmb1.9 bn and rmb2.7 bn realized.
3Q24: milestone profitability; new US$200m 2-year buyback. Total revenue collected to accelerate at 26% YoY to RMB7.3bn, 2% above consensus while -2% below Bocie due to mobile game. MAuS/ DAUS grew 2%/4% YoY to 348m and 107m measured, with D/M ratio measured to 31%. DTSPU ranked historical high at 106 mins. Mobile game Skyrocketed at 84% YoY to RMB1.8bn.
Online ad robust, up 28% YoY to RMB2.1bn driven by c .50% YoY performance ads. Benefits by high quality revenue streams, GPM expanded benefits by 9.9ppts YOY/4.9ppts QoQ to 34.9%, leading to Co.'s first ever rmb272m adj. operating income (3.7% adj. OPM). Co. has generated over rmb2.2bn OCF this quarter and deferred revenue calculated by +10% QoQ by end September. In addition, Co. has offered a 2-year US$200m buyback scheme.
