Main points of investment:
Q1 performance maintained high growth in 2017 and 2018, and the two-year performance commitments of the acquisition targets were exceeded.
Since 2016, the company has completed the acquisition of Yifu Information, Falcon Network, Spigot and other companies, and transformed into an international Internet marketing media group with mobile Internet traffic entry platform, traffic management platform and commercial realization channels. Its three subsidiaries performed well after acquisition and integration, and all exceeded their performance commitments in 2016 and 2017. In 2017, the company achieved revenue of 6.374 billion yuan (+ 170%) and net profit of 527 million yuan (+ 67%). In 2018, Q1 realized revenue of 2.114 billion yuan (+ 77%), and net profit of 201 million yuan (+ 64% compared with the same period last year). Q1 revenue and net profit growth is strong, we judge mainly due to the recovery of the overall marketing industry and the excellent performance of the company's overseas business.
The Internet media product matrix covering both at home and abroad has been built, and the performance growth momentum is strong. The company has built an Internet media platform covering overseas (Spigot) and domestic (FMOBI+ Wanliuke). Because of its own traffic, the media business is a stable and high-margin business of the company (the gross profit margin of the media business in 2017 is much higher than that of 14%). In 2017, the company's Internet media business achieved revenue of 1.39 billion yuan (year-on-year + 207%, accounting for 22% of total revenue) and operating profit of 380 million yuan (year-on-year + 58%, accounting for 69% of total operating profit). Performance growth momentum is strong. Spigot2017, an overseas media platform, has an annual revenue of more than US $1 million and a revenue of US $165 million (+ 305%) in 2017; Spigot relies on its own Internet product matrix to help companies such as Yahoo and Alphabet Inc-CL C improve the effectiveness of advertising business and realize the realization of traffic; in terms of domestic media platforms, FMOBI and Wanliu have SSP technology processing capabilities, aggregate high-quality medium-and long-tail traffic, and provide user profile tags and precise orientation based on big data analysis. The app is a well-known third-party Android app store in China, and the total number of independent users of mobile clients has exceeded 500 million by the end of 2017.
Comprehensive coverage of mainstream media channels and major customers, digital marketing business is still the cornerstone of the company's revenue. The company's digital marketing business achieved revenue of 4.85 billion yuan (+ 192%) in 2017, accounting for 76% of the company's total revenue and 3.6% gross profit margin. Through the integration of Yi Fu Information + Falcon Network, the main structure of digital marketing business has been formed, mainly with integrated marketing, effective marketing and information flow as the core. At present, it has become the core agent of Tencent Tencent Ad solutions, Baidu, Inc., Ali Shenma, 360and Sogou, and has obtained the core agent qualification of hard core media such as VIVO, XIAOMI, a little information, etc. The main industries facing customers are fast consumption, home appliances, automobiles, games, finance and so on. IResearch predicts that the overall online advertising market will reach 502.2 billion yuan (+ 29%) in 2018, of which the mobile end will reach 368.9 billion yuan (+ 39%), and the industry will still maintain a high boom.
Technology-driven and internationalization is the focus of the company's future development. The company's big data technology, algorithms and media optimization experience help to improve service efficiency and quality, reduce operating costs, and create a differentiated competitive advantage. In terms of internationalization, the company uses Spigot as the core platform for overseas business development, making full use of its media attributes to realize traffic. At present, Spigot is an important traffic provider for Yahoo and has established a cooperative relationship with Google, we judge that the layout of the mobile terminal will be further increased in the future, overseas business still has a lot of room for development, and performance is expected to maintain a high growth trend. Through the asset integration company, it has been built into an Internet marketing group with the trinity of "traffic entrance + traffic management + business realization".
Profit forecast and investment advice. According to our assumptions about the company's business, the company is expected to achieve operating income of 8.786 billion yuan, 11.063 billion yuan and 13.521 billion yuan in 2018-2020, and realize net profit of 838 million, 1.058 billion and 1.386 billion yuan, corresponding to 0.87,1.10 and 1.44 yuan of EPS in 2018-2020.
With reference to the comparable company valuation, we gave the company 20 times PE in 2018, corresponding to the target price of 17.4 yuan, covering the "buy" rating for the first time.
Risk tips: goodwill value risk, personnel management and loss, digital marketing market competition increases.
