[investment points]

The company issues its annual report for 2021. During the reporting period, the company achieved operating income of HK $1.396 billion, an increase of 51.08% over the same period last year, a gross profit of HK $452 million, an increase of 49.84%, and a net profit of HK $245 million, an increase of 76.41% over the same period last year.

The effective marketing services of mutual entertainment and other digital products have increased steadily, and the marketing efficiency has improved significantly. According to Frost Sullivan data, China Mobile Limited's new media effect affects the rapid growth of the service market. As the largest mobile new media effect marketing service provider in 2021, the company has a market share of about 1.9%. During the reporting period, the company's operating income from mutual entertainment and other digital product effect marketing services totaled 960 million yuan, an increase of 19.43% over the same period last year, of which the average revenue per marketing billing behavior increased by 32.92% year-on-year to HK $2.14. Specifically, revenue from games products reached HK $597 million, up 37.28% over the same period last year; revenue from online literature products reached HK $116 million, down 23.80%; and revenue from applications and other products reached HK $246 million, up 14.03% from the same period last year.

Short video e-commerce services continued to increase, overseas e-commerce business landed. In 2021, the company's e-commerce-related business GMV11.89 billion, a year-on-year increase of 100.32%, and realized operating income of HK $288 million, an increase of 142.86% over the same period last year, becoming the main driving force of the company's performance growth.

Among them, the company's overseas e-commerce commodity sales business landed in the fourth quarter, and contributed HK $148 million in revenue. With the further improvement of the number of overseas short video platform users and commercial demand, the business is expected to continue to thicken the company's performance.

The cost increases and the investment in research and development continues to increase. In 2021, the company continued to increase R & D investment to further strengthen data analysis, algorithms and overseas head short video platform business to improve marketing efficiency; during the reporting period, the company's R & D expenses totaled HK $71.79 million, an increase of 162.29% over the same period last year. By the end of the year, the company had established a total of 178 data models according to different product categories, an increase of 20.27% over the same period last year, with 2684 data labels, an increase of 39.57% over the same period last year. In addition, during the reporting period, the company's distribution and sales expenses increased significantly by 675.23% year-on-year to HK $41.32 million, while administrative expenses increased by 81.68% to HK $75.47 million. The sharp increase in fees is mainly due to the increase in e-commerce publicity fees and the increase in staff costs and professional service fees after the listing of the company.

[investment advice]

The company is the largest mobile new media effect marketing service provider in 2021, taking the lead in subdivision; at the same time, the landing of overseas business is expected to further thicken the company's performance. It is estimated that in the next three years, the company's marketing revenue from mutual entertainment and other products will be about HK $10.1max 10.6 / 1.11 billion, the revenue from the domestic e-commerce business will be about HK $4.3pm 5.6 / 670 million, and the revenue from the overseas e-commerce business will be about HK $10.4max 18.6 / 3.17 billion. As the overseas e-commerce business is in a period of rapid expansion, strategic losses are expected in the short term.

Based on this, we estimate that the company's operating income from 2022 to 2024 will be HK $24.8, 34.8 / 4.95 billion, respectively, and the net profit attributable to the company will be HK $2.6 million, respectively. The net profit will be HK $0.10 million, and the EPS will be HK $0.12, 0.14, respectively, and the corresponding PE will be times that of 23-19-15.

[risk Tip]

Macro-economic downturn

Stricter supervision of the industry

The development of e-commerce business is not as expected.