Douyin already accounts for the third of the four major realization modes of the Internet: advertising, e-commerce, games and members. after advertising, we expect that e-commerce will be the first to usher in the rapid growth of Douyin industry chain, benefiting from the fierce competition from downstream e-commerce platforms. Mid-stream partners are expected to fully benefit. Unlike Taobao JD.com, Douyin, Kuaishou Technology and other content platforms, the main logic of e-commerce realization is content diversion (including volume sales, live streaming, short video diversion, etc.), with the help of Douyin accurate information flow distribution to achieve "goods to find people".
In 2020, the company will accelerate the promotion of brand operation. Based on the Philips service experience in 2015, the company tried two small and medium-sized brands to operate on behalf of the company in early 2019. In 2020, the company will focus on promoting the brand operation project. Prior to this, the company has decided to increase funding to accelerate brand agent operation and develop a high-ROE business scenario. After logic verification, the company can quickly replicate successful cases on a large scale. The advantages and breakthrough points of the company's layout and brand operation are as follows:
(1) experienced in cross-media services, focusing on expanding new e-commerce channels such as Kuaishou Technology, Douyin, Bilibili Inc. and Xiaohongshu. Unlike TP, which is deeply tied to a single platform (intra-site traffic advantage), marketing companies have cross-platform / media service experience (off-site traffic advantage), and the traffic logic of new and old e-commerce channels is different. Beijing Amoy and other old channels are mainly search bidding, while traditional TP companies bind platforms close to traffic has a comparative advantage, while new channels such as QuickShao are mainly content flow, marketing companies have the ability of advertising creative planning and content production, and have the relative advantage of content diversion. Therefore, the company will give priority to cut into the new e-commerce sales channels, accumulate rich experience and then copy the operation experience to traditional e-commerce channels such as Beijing Amoy. According to the company's research, the company has launched its own Douyin Shop (HYstore), and launched its own brand interest card Douyin franchise store with Zhang Guowei's live broadcast on June 20. At the same time, it is promoting Xi'an Museum Derivatives Douyin Store, etc., and will continue to launch all kinds of Douyin / Kuaishou Technology stores in the future.
(2) Brand customers are rich in resources, and the company will focus on transforming existing brand customers, and the business model will be realized and upgraded from advertising to "advertising + sales". The company has upstream brand main resources and generation operation ability, and has obvious advantages and synergy in cutting into the new business direction. Hundreds of medium and large brands are the natural customer pool of new business. According to the company's research, at least 10 brands / product generation operations are expected to be expanded in 2020. On May 18, the company's advertiser Katzilan's first live broadcast GMV exceeded 50 million, and on June 6, Huashao Kuaishou Technology's live broadcast debut GMV reached 174 million. The logic gradually begins to verify.
(3) small and medium-sized brand customers explore multiple cooperation models. The company gives priority to landing joint venture mode (the company has relative bargaining advantage) and all-channel operation. The company has landed the joint venture brand interest card in March, organized 700KOL/KOC for publicity and recommendation in May, and will formally conduct effect diversion in June (Zhang Guowei's first live broadcast on June 20) to pay attention to the landing of June sales data.
We believe that the strong entry of new media such as Douyin and Kuaishou Technology into live e-commerce will have a strong impact on the downstream competition pattern, and the partners of the mid-stream industry chain will fully benefit and enjoy the advantages of high growth dividends and high profit margins in the industry. The logical interpretation of online celebrity marketing / live streaming has entered a new stage, and we are optimistic about marketing companies with resource barriers (with rich brand customer resources) and agent operating companies (binding to strong platforms such as Taobao).
Investment suggestion: based on the experience of e-commerce operation, the company will focus on exploring new operation modes with large-scale replication capability, including new channel generation operation mode, joint venture generation operation mode and so on. The high elasticity of the company's performance is expected to come mainly from brand operation and is expected to fully release Q2 in 2020. In view of the inflection point in the industry, the company has a positive demand for transformation, and 5G traffic change is expected to harvest the company Alpha and industry beta at the same time. We estimate that the return net profit of the company from 2020 to 2022 is 350 million, 500 million and 600 million, corresponding to 1.52,2.16,2.60 yuan (not considering fixed increase items for the time being). The company will be given 25 times PE in 2020, with a target price of 37.75 yuan, maintaining the "buy-A" rating.
Risk tips: downstream competition intensity is not as expected, the progress of new customer development is not as expected, brand agent operation business is not as expected, sales budget expansion is not as expected and other risks.
