The growth rate of the annual performance is steady, and the SaaS business has been commercialized successfully. In 2021, the company realized income of 3.122 billion yuan (+ 21.17%) and net profit of 117 million yuan (+ 13.31%). Among them, the business income of online marketing solutions is 3.07 billion yuan (+ 19.8%), and the SaaS business is commercialized successfully, with a revenue of 32.88 million yuan in the first year. In the second half of 2021, under the background of macroeconomic slowdown and temporary pressure on the advertising market, the growth rate of the company's online marketing business slowed down. By the end of 2021, the company had a cash and bank balance of 636 million yuan, sufficient cash reserves and a healthy financial structure.

Diversified customer structure to reduce the risk of a single industry. In 2021, the number of advertisers served by the company reached 882, an increase of 2.44 percent over the same period last year, providing services to more than 6914 advertisers in 222vertically segmented industries, including Internet services and tools, online games, financial services, e-commerce and so on. Through direct cooperation with China head short Video platform, and business cooperation with BABA Group and Xiaohongshu, the company has formed a multifaceted coverage of the short video media and pipeline market, and the brand live broadcast operation officially launched in 2021 generated a total effective commodity transaction value of 73 million yuan. In April this year, the company disclosed a strategic investment of 5.26% equity in Crouching Rabbit Network, which is mainly engaged in cross-border brand marketing. we believe that this cooperation is expected to combine the company's short video marketing technology as well as the company's global regional coverage and cross-border operation experience. strengthen the company's development layout of overseas short video business, looking for new traffic dividends and performance growth drivers.

Upgrade the business model to a platform and create a full ecological service matrix for short video marketing. The company develops a business architecture with online marketing solution business as the core, including SaaS services, brand live broadcast operation, brand cross-border services and talent economy, to create perfect short video marketing ecological links and technical service solutions for customers. The business revenue of online marketing solutions in 2021 was 3.07 billion yuan, an increase of 19.8% over the same period last year. The company added short video marketing cloud service business in 2021, and the one-stop cross-platform stylized advertising and data management platform "Lianshan +" achieved commercial landing, which generated SaaS service revenue of about 33 million yuan in 2021. The company's independently developed commercial video trading platform, "Co-production Video", promotes the scale and automation of video content production, and the two core platforms successfully lead the company's business to upgrade to a platform. to achieve full-link coverage of short video marketing from creation, trading to launch and optimization. We believe that the establishment of the full ecological service matrix will help to improve the competitiveness of the company and promote the large-scale growth of the company's business.

Create high technical barriers to competition, science and technology enable short video marketing business to reduce costs and improve efficiency. As a technological innovation-oriented technology company, the company's leading technology and platform services continue to be recognized by the industry and continue to win many awards and honors. The "co-production video" developed by the company expands the video production capacity with the help of AI video auxiliary processing technology, speeds up the video automation production process, achieves a maximum video production capacity of more than 20,000 pieces in 2021, achieves a maximum monthly production capacity of 271 pieces per team, and programmatically connects more than 620 video creators, realizing cost reduction and large-scale expansion of short video production capacity.

Profit forecast and valuation analysis. We believe that the short video traffic represented by Douyin and Kuaishou Technology is still in a high growth period, the co-production platform built by the company already has industrial video production capacity, and the commercialization of Lianshan SaaS platform is expected to continue to help the company improve the efficiency of short video delivery in the future. We expect the company's operating income from 2022 to 2024 to be 40.89,52.84 and 6.694 billion yuan respectively. With reference to the comparable company, we give the company a dynamic PS of 0.8-1.0 times in 2022 and calculate it at the latest equity and exchange rate (RMB: HK $1: 1.17) with a reasonable value range of HK $4.81-HK $6.01 per share, giving the company an "better than market" rating for the first time.

Profit forecast assumptions: 1) with the growth of large market traffic of short videos and the gradual control of the national epidemic, the advertising market is expected to gradually pick up, and the company's online sales services are expected to maintain steady growth in 2022-2024; 2) SaaS business represented by Lianshan has been officially commercialized in 2021, and the revenue scale is expected to grow rapidly in the next three years. 3) with the improvement of the company's data delivery efficiency and the increase in the proportion of revenue from SaaS services with high gross margin, the company's overall gross profit margin is expected to increase steadily and slightly.

Risk hint. Rising cost of Internet traffic; regulatory risk of short video content policy.