1H23 performance fell short of our expectations
The company announced 1H23 results: achieved revenue of 233 million yuan, -7% year-on-year; net profit to parent - 45 million yuan, net profit after deducting non-return net profit - 49 million yuan. The year-on-year loss narrowed markedly. Looking at 2Q23 in a single quarter, we achieved revenue of 123 million yuan, -3% year-on-year, a month-on-month improvement in growth rate; net profit at the source was 27 million yuan, net profit after deducting net profit after deducting net profit of -31 million yuan, and the year-on-year loss narrowed markedly. Due to the objective influence of the macroeconomy, the purchasing power of downstream customers declined, and overall performance fell short of our expectations. However, in 2Q23, revenue growth improved month-on-month; the company optimized its personnel structure, reduced expenses, and reduced losses were beginning to show results.
Development trends
The SaaS growth rate of large merchants is steady, and the hardware and operation business continues to shrink. 1H23's core e-commerce SaaS product revenue was basically the same as in the same period last year, while supporting hardware, CRM, and operation service businesses have all shrunk significantly. Focusing on the big merchant strategy, 1H23's core business product revenue was +21%, of which the company's revenue was +153% and +414%, respectively. Affected by macroeconomics, market competition, and weak traffic growth on mainstream e-commerce platforms, etc., the revenue of SaaS products for small and medium-sized businesses declined. The company continued to promote a multi-platform strategy. The company continued to promote a multi-platform strategy, and 1H23's SaaS Douyin platform revenue was +57%. Fee control has achieved remarkable results, and both profit side and cash flow performance have improved. The improvement in revenue structure led to an increase in gross margin. 1H23's overall gross margin increased by 1.7 ppt compared to the full year of 2022. The company strengthened the refined management of the national marketing network system. Sales expenses were -8% year-on-year. At the same time, the company optimized personnel, and the management expenses ratio decreased by -7ppt year-on-year. Under comprehensive influence, the company's 1H23 net loss narrowed markedly year-on-year. Furthermore, 1H23's net operating cash flow was -013 million yuan, a sharp narrowing compared to the same period last year. We believe that the pace of economic recovery in 1H23 will affect the recovery of the company's performance to a certain extent, but we can already see a marginal improvement trend.
The company has developed mature products in the field of e-commerce x AI. The company has been deeply involved in e-commerce for many years. The ShenZhen Art Robot uses image processing algorithms and detail page layout technology to support the automated production of product detail pages in batches. Based on NLP technology, the intelligent customer service robot was upgraded in cooperation with Alibaba and Xiaomi in March 2022, and 1H23 gradually expanded and doubled. The revenue structure is excellent, and fee control is continuously optimized. On the one hand, the company's revenue structure continues to improve and the SaaS share continues to rise. On the other hand, as some of the company's new SaaS projects gradually shift from an investment period to a payback period, the company makes timely policy adjustments and optimizes the personnel structure. We believe that the profit side is expected to continue to improve in the future.
Profit forecasting and valuation
1H23's performance fell short of our expectations. The 2023/2024 revenue forecast was lowered by 10%/16% to $523/594 million yuan, the 2023/2024 profit forecast was lowered from -0.67/030 million yuan to -0.81 billion yuan to -0.81 billion yuan, maintaining outperforming industry ratings, and lowering the target price by 20% to 16 yuan (based on 2024 SOTP), which is 39% upward from the current stock price.
risks
The number of paying users for traditional products declined; promotion of new products fell short of expectations; cost investment exceeded expectations.