According to the Everbright Securities Research Report, Weimeng Group (02013) released 1H23 results, achieved revenue of 1.21 billion yuan, with consistent expectations of 1,079 million yuan, and gross profit of 816 million yuan. The corresponding gross margin was 67.5%. The gross margin for subscription and merchant solutions was restored to 66.1% and 69.4%, respectively; after adjustments, net loss narrowed sharply to 254 million yuan. The company guidelines 23H2 were close to break-even and achieved full-year profit in 24 years.

According to the bank, merchant solution revenue exceeded expectations, and gross advertising revenue and rebate spreads both increased. Among them, solution revenue reached 504 million yuan (58.3% increase over the same period), 40,500 paying merchants (51.3% increase over the same period), and gross advertising revenue from the company helped merchants launch was about 6.988 billion yuan, an increase of 66.1% over the previous year. In addition, subscription solution revenue has been growing steadily, and the effects of the big marketing strategy are showing. Among them, subscription solution revenue was 706 million yuan (21.4% increase over the same period), the number of paying merchants was 101,000 (down 3% from the same period), the company's digital brand and product competitiveness was strengthened, and the renewal rate for major customers was high. Customers who purchased 2 or more products and businesses in the first half of '23 accounted for 58% of all customers. It is worth mentioning that the acceleration of the commercialization process of video accounts and channel expansion are beneficial to the company's advertising business; the big customer strategy continues to deepen, and cross-selling of multiple products further increases the unit price per customer.

The bank expects strong advertising business expansion. It slightly raised its 23-25 revenue forecast to 24.6/30.2/3.54 billion yuan (+3%/+3% from the previous forecast), and raised its 23-25 adjusted net profit forecast to -2.8/0.28/320 million yuan (previous forecast -3.7/-0.5/200 million yuan). The current stock price corresponds to the 23-year forecast of PS4.2x, is at a low historical valuation level, and has been raised to a “buy” rating.