Core views:
The company released 24Q1 earnings report: 24Q1 revenue of $395 million, YoY -4%, QoQ -15% (Bloomberg's agreed estimate of $388 million), and revenue with a constant exchange rate remained flat year-on-year. The gross margin reached 78%, a year-on-year decrease of 1.2 pct, and a month-on-month decline of 0.4 pct. GAAP net profit to mother was $49.44 million, YoY -51 percent, QoQ -41%, and the agreed forecast was $62.98 million.
NongAAP's net profit to mother was $107 million, YoY -4%, QoQ +40%, and the agreed forecast was $85.9 million (actually exceeding the agreed estimate by 24%), and revenue and profit margins remained stable.
The beauty industry is still under pressure, and industries such as 3C, automobiles, and healthcare continue to grow. 24Q1 advertising revenue was $339 million, YoY -5%, QoQ -16%, and constant exchange rate revenue was flat year over year. 24Q1's advertising revenue from Alibaba was US$21.55 million, up 23% year on year, down 50% month on month; third party advertiser revenue was US$316 million, down 6% year on year, down 12% month on month. Looking at the industry, apart from beauty, which is still declining, industries such as 3C, automobiles, and healthcare have continued to grow. Looking at the second half of the year, the Summer Olympics in the third quarter will also help increase brand advertising. The company will obtain customer budgets in industries such as footwear, games, food and beverage, and health. 24Q1VAS revenue was $56.55 million, YoY -3%, QoQ -6%.
Profit forecasting and investment advice. Q1 Revenue and profit performance was relatively steady. Looking at performance by industry, with the exception of the decline in beauty, which dragged down performance, all other industries grew to varying degrees. We expect that the second half of the year, Olympic event marketing may lead to an increase in advertising budget, combined with the narrowing of the decline in the beauty industry, or bring opportunities for upward adjustments in performance. We expect revenue of $1.77 billion and $1.84 billion in 2024-25, up 0.7%/3.8%. The adjusted net profit for 2024-25 is estimated to be US$487 million and $532 million, up 8.0% and 9.4% year-on-year. The 24-year adjusted net profit was 7.6 times PE based on the 1xPEG valuation, and the reasonable value was US$15.22/ADS (HK$118.87 per share), maintaining the purchase rating.
Risk warning. Risks such as a single revenue structure, Sino-US regulatory policies, and exchange rate fluctuations.