Report Guide
The market believes that the company is a traditional digital card dealer. We believe that the company has the attributes of “aggregated transaction+SaaS service” and is expected to become a third-party “platform-level” company with Internet user operations growth. The speed of business evolution is expected to exceed market expectations. It is covered for the first time, and is recommended for purchase.
Key points of investment
Exceeding expectations: Fulu's business is by no means just a digital card dealer, but a third-party “platform-level” company with growing Internet user operations. The business attributes and business model are expected to exceed market expectations.
The market believes that the company is only a digital card dealer, and the business lacks highlights; we believe that the company is not only a digital card and voucher dealer, but also a third-party market leader in the operation and growth of Internet users, and is expected to have platform attributes. In terms of business attributes and business model, we believe that the pace of evolution of Fulu's business is expected to exceed market expectations.
Investment logic: The high increase in the digital good+service circuit provides a margin of safety, and the “aggregate transaction+SaaS service” platform is expected to increase valuation and space
1) 1.0 digital card voucher distribution is a good “three high and one light” business: high growth, high profit, high turnover, light assets, ROE over 30%. 2) 2.0 Service provider logic: The essence of digital goods and services is the monetization and growth of Internet user (traffic) operations, and the third-party user market is unquestionably a contentious place. Fulu upgraded to a digital good+service operator (2.0) to provide upstream services such as proxy operation+downstream construction of changing scenarios, and play an important role in the industrial chain. 3) 3.0 platform logic: The establishment of an “aggregated transaction+SaaS service” platform breaks the ceiling. a. Break through traditional KA customer customization, standardize services for SMB customers, and launch SaaS; b. Supply chain advantages enable Fulu to provide “matched transactions” to medium and long-term customers, enhance stickiness and repurchase, and collect GMV points (commissions) while also entering and promoting SaaS services through transactions. c. Form a “converged transaction+SaaS service” flywheel, which ultimately hopes to become a “platform-level” company.
Competitive advantages and barriers: customer resource barriers, technical and operational capability advantages, capital advantages 1) The core advantage lies in upstream and downstream customer resources, which require high time and cost accumulation. 2) Technical and operational capability advantages: KA's experience in the service industry has enabled the company to accumulate leading technology and industry know-how, which has laid a solid foundation for the construction of SaaS platforms. 3) Capital advantage: The company's business model is clear and has scale effects. After the IPO, it is expected to enhance its competitive advantage through rapid capital expansion.
Future growth strategy: Deepening the “one vertical, one horizontal” strategy is expected to build a platform in the future.
Vertical: Continuously increase the richness of upstream products upward, expand segments in the four major categories, explore more potential suppliers; cover more consumption scenarios downward. Horizontal: Dig deeper into the value of individual users, reach more fields by providing more SaaS services and applications to B-end users, and at the same time provide more services to C-end users. Through in-depth exploration of consumption data, such as accurately describing user images, etc., the possibility of cross-purchasing is increased, and more growth points are created.
Profit forecasting and valuation
We expect the company's revenue for 2021-23 to be 458.17/581.10/757.32 million yuan, an increase of 39.60%/26.83%/30.33%, a net profit of 232.02/304.64/414.92 million yuan, an increase of 92%/31.3%/36.2%, and EPS of 0.58/0.76/1.04 yuan. Based on adjusted net profit of 153 million dollars in 20 years, we expect the company's net profit CAGR for the next three years to be about 40%. Based on the company's leading position and future growth, with reference to conservative valuations of consumer goods, we give a corresponding compound three-year CAGR of 0.7 X PEG, corresponding to about 30X PE in '21, with a target market value of about 6.96 billion yuan, about 8.44 billion HKD, corresponding target price of 17.4 yuan and HK$21.1.
Risk warning: Product distribution business falls short of expectations, value-added service business falls short of expectations