Mobvista's 3Q23 earnings was largely in-line, with revenue +26% YoY (2% below our estimates) and profit at US$4.1mn (in line with our estimates).
Mintegral's revenue accelerated to 28% YoY in 3Q23 (vs. +14% YoY in 2Q23), in which revenue mix of midcore and hardcore games climbed to 32% in 3Q23 (vs. 31% in 2Q23). For ROAS mode, it might take some time to see meaningful contribution from the in-app purchase feature. We expect margin enhancement to continue in FY24/25E (forecasting adj. NM at 2.6%/2.7%), backed by narrowing loss of Reyun and higher ads efficiency. We keep our earnings forecast in FY24/25E barely changed. Maintain BUY with SOTP-based TP at HK$6.0 (1.2x/1.0x FY23/24E P/S, or 37x FY24E P/E, with 41% earnings CAGR in FY23-25E).
3Q23 earnings largely in-line. 3Q23 revenue accelerated to +26% YoY (vs. +11% YoY in 1H23), 2% below our estimates. By segment, ad-tech/mar- tech +25.8%/33.1% YoY. Adj. net profit reached US$4.1mn, largely in line with our estimates. GPM came at 20.6%, relatively stable QoQ. Adj. EBITDA was US$23.6mn, largely in-line.
Higher revenue mix from midcore & hardcore game ahead, despiteslower ramp-up of ROAS. Mintegral's revenue accelerated to 28% YoY in 3Q23 (vs. +14% YoY in 2Q23), in which revenue mix of midcore and hardcore games climbed to 32% in 3Q23 (vs. 31% in 2Q23). For ROAS mode, ROAS intelligent bidding feature received market validation in 3Q23 and algorithm optimization is on track, but it might take some time to see meaningful contribution from its in-app purchase feature. To factor in lower revenue contribution from ROAS and google cooperation, we slightly cut our topline forecast by 5% in FY23-25E.
Intact margin ahead. 3Q23 adj. NM reached 1.5% (vs. 1.7% in 2Q23).
Looking ahead, we expect margin enhancement to continue in FY24/25E (forecasting adj. NM at 2.6%/2.7%), backed by narrowing loss of Reyun and higher ads efficiency (with the continued application of cloud-native technologies). ROAS algorithm optimization might affect model training fee, but well managed. After margin adjustment, our earnings forecast in FY24/25E was barely changed.
Maintain BUY. We maintain FY24/25E earnings forecast unchanged, with new TP at HK$6.0 (by assigning 30x FY23E P/E to ad-tech biz and 3.3x FY23E P/S to mar-tech biz).
