Company profile:
Doumeng Technology is an innovative mobile advertising technology company in China, focusing on precision advertising service and traffic distribution service. According to iResearch, Doumeng is the second largest interactive advertising company in China, with a market share of 12.0% in the first half of 2018, up from 7.2% in 2017. In the early days, the company mainly provided non-interactive advertising in the form of banner advertising, screen advertising, information flow advertising and so on. In 2017, the company strategically developed interactive advertising, mainly through the software development kit (SDK) downloaded by media publishers on the company's platform. The company listed on the new third board in March 2017, but in order to improve corporate governance, brand awareness and financing channels, the company decided to deleverage on the new third board and change to Hong Kong Exchanges and Clearing main board listing.
Sino-Thai point of view:
The industry is becoming more and more concentrated and the degree of traffic matching is high: the market size of China's third-party mobile advertising platform reached 16.2 billion yuan in 2017 and is expected to reach 33.8 billion yuan in 2022. Although the company has reached the second place in the industry, its market share is only 7.2% in 2017, which is far behind the leading company in the industry, which accounts for nearly 60% of the market share. It is expected that there will be nearly 100 interactive advertising platforms in China by the end of 2018, and the competition will become increasingly fierce. As a small number of leading interactive advertising platforms merge smaller competitors in the market, the current fragmented market will begin to concentrate. The company's advertising platform attracts about 277.5 million monthly active users. Through the proprietary advertising platform, the company collects a large amount of consumer data without infringing upon consumer privacy, helps advertisers place advertisements accurately, and uses the target conversion bidding system (oCPC system) to intelligently and automatically identify the highest conversion rates of specific advertisements, so as to improve the ability to realize advertising.
In terms of business performance: Dou League's total revenue has grown steadily in recent years, from 2015 to 2017, it was 135 million yuan, 199 million yuan and 223 million yuan respectively, with a compound annual growth rate of 28.3%, and net profits of 21.659 million yuan, 24.832 million yuan and 34.168 million yuan respectively. In terms of gross profit margin, it decreased to 27.78%, 21.71% and 22.41% respectively, due to the increase in traffic acquisition costs associated with large media publishers (which generally charge more online traffic than small and medium-sized media publishers) of non-interactive advertising intermediary services. Doumeng began to have interactive advertising revenue in 2017, of which the revenue from interactive advertising was 76.54 million yuan, accounting for 34.3% of the total revenue for the year, while the revenue from non-interactive advertising was 138 million yuan, accounting for 62.2%.
This gap narrowed in early 2018, with interactive and non-interactive revenues accounting for 57.1% and 42.9%, respectively, and interactive advertising will become particularly important in generating revenue in the future.
In terms of valuation: the company's market capitalization is in the lower-middle level compared with Hong Kong stocks in the same industry, at HK $9.2-1.15 billion. The historical price-to-earnings ratio and price-to-book ratio are 22.8-28.5 times and 3.08-3.57 times respectively, which are higher than the industry average. In terms of profitability, the ROE,ROA is 32.5% and 25.2% respectively, which is higher than the industry average.
The comprehensive company in the industry status, performance and valuation level, we give it 64 points, rating as "neutral".
Risk factors: (1) market competition risk; (2) difficulty in obtaining traffic