Core view: The business model has limitations: concentration is limited and the involvement of the industrial chain is weak, making it difficult to create giants in the online recruitment industry. Benefiting from media changes and platform design restructuring, BOSS direct recruitment has surpassed its predecessor, and has an obvious moat under the protection of competitive advantages and niche markets. Considering the large amount of cash on book and the potential for future profits, current valuations have a margin of safety, and improved shareholder returns will be an important variable affecting return on investment.

First coverage, giving a “buy” rating. We expect the company's revenue for 2024-2026 to be 7.36/8.87/10.43 billion yuan, up 23.7%/20.4%/17.7% year on year; net profit to mother of 1.48/2.12/2.85 billion yuan, up 34.6%/43.7%/34.2% year on year; EPS of 1.64/2.36/3.17 yuan, corresponding to PE 30.3, 21.1 and 15.7 times PE. Considering the company's competitive advantage and future potential, the current valuation is highly attractive, giving it a “buy” rating.

The high concentration of the Internet industry is not an inevitable result; the pattern is limited by the economic characteristics of the corresponding industry. The market's initial impression of the Internet industry is that marginal costs are low and winner-take-all, but in reality, many industries maintain a relatively fragmented pattern, such as online recruitment, second-hand housing transactions, e-commerce, etc. We introduced the three elements of platform competition theory: economies of scale, diversity of demand, and exclusivity to explore the logic of differences in concentration in the Internet industry to understand the online recruitment industry pattern.

Limited industry concentration and value chain depth, online recruitment of giants. Looking horizontally, the industry is scattered due to limited network effects and the tendency of users to share multiple platforms. Looking vertically, since most parts of the recruitment industry are non-standard and lack economies of scale, online recruitment can only slightly intervene in the lead matching process, and value creation is insufficient. The combination of the two made it difficult for the industry to become a giant, and the companies that went public in the early stages all ended in privatization.

BOSS Direct Hiring was able to rise to prominence, and its underlying logic was similar to Indeed: it captured the window period of media change and restructured the platform design. Internet businesses rely on economies of scale/network effects as a moat, making it difficult for latecomers to compete with them using the same business model. However, the paradigm shift will cause this moat to be circumvented, which is the foundation for the iteration of internet business. Taking the rise of BOSS direct employment as an example, this paradigm shift is reflected in two points: (1) traffic from PC to mobile, and the value of commercial networks established by original participants in the PC era declined; (2) restructuring of platform design: introducing instant messaging in information interaction, and the commercialization method changed from pre-payment to free+payment, which greatly improved the platform's information interaction efficiency and network effect intensity.

Relying on competitive advantages and niche market protection, BOSS Direct Hiring has established an obvious moat. Judging from the results, the company's MAU is close to the sum of 2-4 people in the industry, and the revenue volume and growth rate are far better than those of peers. From a logical point of view, under the current convergent platform design, BOSS direct recruitment relies on network effects and data-driven matching optimization to build a competitive advantage. Due to the small scale of the industry, Internet giants have no intention of entering the market, making BOSS's direct employment position more stable.

The company is in a phase where revenue is growing rapidly and profits are gradually being released. Considering future potential, the current valuation is attractive. The increase in user penetration rate and take rate jointly drive revenue growth. As economies of scale and share of equity incentive expenses decline, the company is expected to be in a phase of rapid profit release. The company reserves a large amount of cash and has excellent cash flow. If it can be used effectively (effective investment/dividend repurchase), shareholders will obtain significant additional benefits in addition to performance growth.

Risk warning: (1) risk of declining macro demand; (2) risk of sample deviation; (3) risk of information lag; (4) risk of deviation in industry size measurement