In 2022, the company achieved revenue of 890 million US dollars (yoy +18%); excluding the big media business, revenue increased 29% year over year; achieved adjusted net profit of 9.7 million US dollars, and adjusted net interest rate of 1.1% (yoy+1.6pcts). In 2022, against the backdrop of overall macro headwinds and overseas inflation, the company's core business, Mintegral, still achieved steady growth, with revenue up 44% year over year. Looking ahead to 2023, with the improvement of the macro environment and the company's focus on improving delivery efficiency and the introduction of new product architectures, we expect the company's performance growth to return to the fast track, and the rapid development of AI is also expected to further open up space for the company's efficiency optimization and market expansion. We believe that the company is expected to benefit from the growth in performance brought about by domestic Internet outbound trends and category expansion in the long term, and maintain its “buy” rating.

Performance Overview: Revenue was in line with expectations, and profit turned a year-on-year loss into a profit. In 2022, the company achieved revenue of 890 million US dollars, an increase of 18.4% over the previous year; excluding the big media business, revenue increased 29% year on year in 2022.

Among them, AD-Tech achieved revenue of 880 million yuan, an increase of 17.2% over the previous year; MAR-Tech achieved revenue of 12.59 million US dollars, an increase of 359.7% over the previous year. In 2022, the company achieved net revenue of 220 million yuan, an increase of 51.1% over the previous year; achieved gross profit of 180 million yuan, and the gross profit margin (gross revenue scale) was 20.2% (yoy+4pcts). On the cost side, in 2022, the company's sales/R&D/management expenses were 66.13 million/110 million/48.83 million US dollars, respectively. The cost rate was 7.4%/12.0%/5.5% respectively, compared to +1.2/+2.8/+1.8 pcts. The increase in R&D investment was mainly due to increased investment in R&D personnel and expansion of new categories. On the profit side, in 2022, the company achieved net profit/adjusted net profit of US$1019/9.7 million, all of which turned a year-on-year loss into a profit. The adjusted net interest rate was 1.1% (yoy+1.6pcts), mainly due to the 2022 H2 company's cost reduction and efficiency reduction and strategic contraction of some loss positions.

Ad tech sector: Mintegral is growing steadily, increasing the future growth of R&D boards. In the Ad-Tech sector, in 2022, Mintegral/Natvix achieved revenue of 830,000 million/56.65 million US dollars respectively, an increase of 43.5%/a decrease of 68.1% over the previous year. Mintegral's revenue scale grew steadily thanks to leading efficiency advantages and scale effects; however, Natvix's revenue came under pressure as it divested its leading media agency business. The Ad-Tech segment achieved gross profit of $170 million, with a gross margin of 19.1% (yoy+3.2pcts). In terms of operating data, in 2022, Mintegral's non-light gaming customer revenue contribution reached 44.3% (yoy+10pcts), and the customer structure continued to be rich; in 202Q3/Q4, the company's main traffic retention rate was 95.2%/94.9%, new traffic increased 15.8%/16.6% month-on-month, and the number of partner apps increased 23.6%/23.5% month-on-month. As of December 31, 2022, the customer retention rate (LTM) contributing more than $100,000 to revenue reached 96.3%, and the net expansion rate based on US dollars was 125.1%, showing strong customer stickiness. The company will focus on optimizing ROAS this year. Based on Mintegral's investment efficiency advantages, and the increase in algorithm model iteration speed brought about by increased R&D investment and system architecture upgrades in 2022, combined with the improvement in the external environment and the major trend of Chinese manufacturers going overseas, it is expected to further unleash the growth momentum of the advertising technology sector.

Marketing technology sector: Revenue is growing rapidly, and collaboration capabilities are constantly being strengthened. In 2022, the revenue contribution (net revenue scale) of the MAR-Tech sector reached 5.6% (yoy+3.9pcts), and the GA/thermal engine business achieved revenue of 1.4/11.2 million dollars (yoy +56%/+632%) respectively; the Mar-Tech sector achieved gross profit of 85.27 million US dollars, with a gross margin of 67.7% (yoy-10pcts). The decline in gross profit was mainly due to changes in the business structure caused by the acquisition of Hot Cloud. With the completion of the integration of hot cloud data with the company and the upgrading of products and services, the synergy between the MAR-tech sector and AD-tech is expected to be strengthened, and the closed loop of advertising and data analysis is expected to be further improved, thus jointly driving the company's performance growth.

Development outlook: Going overseas is an important driving force in 2023, and AI opens up room for medium- to long-term growth. In the short term, going overseas is still an important driving force for the company's performance growth. At present, the company has accumulated a deep traffic advantage overseas. In 2022, based on the cumulative number of devices reached, 96.1% of the traffic contribution came from overseas. New products began to expand overseas in 2023Q2, which is expected to be a strong driver for the company's performance growth. Looking at the medium to long term, as AI accelerates industry implementation, the big language model is expected to be deeply integrated with the company's vertical industry model, leading to an increase in operating costs and R&D efficiency, thereby further expanding market space. The company will also open a small R&D center in Silicon Valley to accelerate the advancement of large-scale model projects by linking local resources.

Risk factors: Risk of new revenue falling short of expectations; increased market competition; risk of loss of important customers; risk of loss of goodwill; risk of loss of goodwill; risk of user privacy data supervision, etc.

Profit forecasting, valuation and ratings: Taking into account the improvement of the macro environment and the advancement of the company's new structure and products, we slightly adjusted the 2023-2024 revenue forecast to US$1,13/14.1 billion (previous value: US$1,13/1.39 billion). The additional revenue forecast for 2025 was US$1.69 billion, up 27%/25%/20% year-on-year; slightly adjusted the adjusted net profit forecast for 2023-2024 to US$0.24/049 billion (previous value was US$0.25/053 million), adding 2025 The adjusted net profit forecast was $66 million, up 143%/106%/35% year over year. Referring to the valuations of comparable companies such as Applovin and Unity (an average of about 35x PE valuation in 2024 according to Reuters's consistent expectations), considering differences in growth rate and profitability, we gave the company a 2024 30x PE (adjusted) valuation, corresponding to the 2023 target price of HK$6.0 at a 10% discount rate, maintaining the “buy” rating.