20181114-中国银河国际证券-COMPANY_NEWS_5页_646kb

Babytree Group Summary

Core Content

Babytree Group is a leading maternity and child (M&C) focused community platform in China, serving young families from two years before a child's birth to six years after. The company operates three primary platforms: Babytree Parenting, WeTime, and Meitun Mama. These platforms support a diverse range of services, including community discussions, child development content, and e-commerce, with the advertising segment being the largest revenue contributor.

Key Platforms and Features

• Babytree Parenting: The flagship platform, offering a mobile app and PC/WAP interfaces. It is known for its strong social features, including bulletin boards, Q&A programs, and user-generated content. As of May 31, 2018, it had 330,000 groups with over 7,000 active groups and more than 84 million posts and 1.2 billion comments.

  • Q&A Programs:
    • Community Q&A: Over 35 million questions and 127 million answers by May 31, 2018.
    • Expert Q&A and Ask the Doctor: Users can consult with experts, with over 434,000 exchanges in 2017 and 542 experts partnered with the company.

• WeTime: Launched in 2014, it is a platform focused on child development. It allows users to upload photos and videos, and offers online early education resources. As of May 31, 2018, it had over 466 million photos and 37 million short videos uploaded.

• Meitun Mama: The company's e-commerce platform, integrated into Babytree Parenting. It emphasizes non-standard products and has a dedicated vendor management team. In 2017, non-standard products accounted for 67.4% of total GMV.

Business Model

Babytree Group generates revenue through three main segments:

1. Advertising:

   • Accounts for ~73.2% of total revenue in 1H 2018.
   • Revenue from advertising increased significantly, with CPM being the dominant model.
   • Advertising clients grew from 336,505 in 2016 to 338,000 in 2017.

2. E-commerce:

   • Includes marketplace and direct sales models.
   • Marketplace model: 2,253 vendors in 2017, with GMV increasing from RMB419.0m in 2015 to RMB1,260.0m in 2017.
   • Direct sales model: GMV increased from RMB46.3m in 2015 to RMB208.0m in 2017.
   • The company also introduced the C2M (Customer-to-Merchandiser) model in 2017, using the Babytree Index to monitor trends and offer customized products.

3. Content Monetization:

   • Includes premium content and expert services.
   • Revenue from content monetization was RMB24.7m in 2017 and RMB18.8m in 1H 2018.
   • The gross margin for content monetization improved from 48.2% in 1H 2017 to 90.4% in 1H 2018.

Financial Performance

• Revenue:

  • RMB200m in 2015, RMB509.7m in 2016, RMB729.6m in 2017, and RMB407.5m in 1H 2018.
  • Advertising revenue was the largest contributor, reaching RMB298.1m in 1H 2018, representing 73.2% of total revenue.

• Gross Margin:

  • Overall gross margin improved from 60.4% in 1H 2017 to 76.8% in 1H 2018.
  • Advertising gross margin increased from 77.2% in 1H 2017 to 83.4% in 1H 2018.

• Profitability:

  • The company reported losses in 2015, 2016, and 2017, but adjusted net profit improved in 2017 and 1H 2018.
  • Adjusted net profit margin rose from 24.6% in 1H 2017 to 30.0% in 1H 2018.

Industry Overview

• The M&C market in China is growing rapidly, with the market size of young family spending increasing from RMB6.3tn in 2013 to RMB11.0tn in 2017, at a CAGR of 15.0%.
• The M&C products and services market grew from RMB1.0tn in 2013 to RMB2.0tn in 2017, with a CAGR of 18.9%.
• The M&C-related online advertising market grew from RMB16.0bn in 2013 to RMB45.4bn in 2017, at a CAGR of 29.8%.
• The M&C e-commerce market GMV increased from RMB50.2bn in 2013 to RMB325.1bn in 2017, with a CAGR of 59.5%.
• The M&C content monetization market is expected to grow significantly, from RMB1.1bn in 2017 to RMB12.4bn in 2022, at a CAGR of 62.3%.

Strategic Position and Outlook

• Despite challenges in the TMT sector, Babytree Group is positioned as the largest M&C community platform in China, with few e-commerce platforms listed in Hong Kong.
• The company benefits from strategic investment by Alibaba and Tal Education, which may lead to enhanced growth opportunities.
• The company is expected to attract more market attention once the overall environment stabilizes.

Key Metrics and Growth

Analyst Ratings and Disclaimer

• Equity Ratings:

  • BUY: Share price will increase by >20% within 12 months.
  • SELL: Share price will decrease by >20% within 12 months.
  • HOLD: No clear catalyst, and downgraded from BUY pending clearer signal.

• Disclaimer:

  • The report is issued for institutional clients and is not intended for distribution to the public.
  • No representation or warranty is made regarding the accuracy or completeness of the information.
  • The company and its affiliates may have financial interests in the subject company, and the report may be subject to conflicts of interest.

Conclusion

Babytree Group is a key player in the M&C market in China, with a strong community platform and integrated e-commerce services. The company's business model is diversified, with advertising as the primary revenue source and e-commerce and content monetization growing significantly. The company's financial performance has shown improvement, and its strategic partnerships, particularly with Alibaba, position it for future growth.