20210609-招银国际-Heading_into_Tantan_s_transition_4页_889kb

CMB International Securities | Equity Research | Company Update Summary

Core Content Overview

This report provides an update on Momo (MOMO US), focusing on its financial performance and strategic shifts, particularly related to the Tantan transition. The analysis includes earnings guidance, user metrics, and key financial indicators, with a HOLD recommendation and a target price of US$15.0.

Key Financial Performance

1Q21 Results

• Revenue: -3% YoY, 2% above consensus
• Adj. Net Profit: -14% YoY, 20% above consensus
• Margin Performance: Beat expectations due to lighter S&M and G&A expenses

2Q21E Guidance

• Revenue: -4% to -7% YoY, midpoint 1% above consensus

User Metrics

• Momo MAU: +1% QoQ
• Paying Users: -2% QoY
• Tantan Paying Users: -8% QoQ

Tantan Transition Impact

• Management Change: Founder and CEO Wang Yu stepped down in April; Wang Li took over
• User Growth Target: 20%–35% user growth by end of 2021, with a focus on younger users and balanced gender mix
• Financial Impact: Net loss is expected to widen to RMB350mn–450mn in FY21E (vs. previously RMB100mn)
• Monetization Strategy: Emphasize core dating experience; de-emphasize livestreaming
• Rebound Expectation: Mgmt. expects users and revenue to rebound in 2H21E if the strategy is executed well
• Short-Term Pressure: Expected to be most pronounced in April and May

Earnings Forecast Adjustment

• FY21E: Revenue forecast cut by 21%, Net profit cut by 19%
• FY22E: Revenue forecast cut by 19%, Net profit cut by 19%
• FY23E: Revenue forecast cut by 19%, Net profit cut by 19%

Despite the downward revisions, the target price (TP) remains at US$15.0, reflecting a 12x FY21E P/E multiple.

Momo's Core Business Trends

• Positive YoY Growth Expected in 2H21E
• Stable Recovery: Core trends are well maintained
• Product Focus: Momo will focus on product enhancement rather than aggressive VAS monetization
• Rev Growth Outlook: Double-digit YoY growth in 4Q21E

Financial Summary

Revenue

• FY19A–FY23E: RMB17,142 / RMB15,024 / RMB14,636 / RMB16,458 / RMB18,916
• YoY Growth: 22.5% / -12.4% / -2.6% / 12.4% / 14.9%

Net Profit

• FY19A–FY23E: RMB4,304 / RMB2,896 / RMB2,043 / RMB3,026 / RMB3,745
• Adj. Net Profit: RMB4,304 / RMB2,896 / RMB2,043 / RMB3,026 / RMB3,745
• EPS (RMB): 18.9 / 15.9 / 8.7 / 11.8 / 12.9
• Adj. EPS (RMB): 18.9 / 15.9 / 8.7 / 11.8 / 12.9

Key Ratios

• P/E: 5.2 / 6.2 / 11.4 / 7.7 / 6.3
• P/B: 2.6 / 2.2 / 2.4 / 2.3 / 2.1
• ROE: 29.8% / 23.5% / 11.5% / 18.7% / 23.4%
• Operating Margin: 9.3% / 15.2% / 16.7%
• Net Margin: 14.0% / 18.4% / 19.8%

Revenue Breakdown (1Q21)

CMBIS Ratings

• BUY: Stock with potential return of over 15% over next 12 months
• HOLD: Stock with potential return of +15% to -10% over next 12 months
• SELL: Stock with potential loss of over 10% over next 12 months
• NOT RATED: Stock not rated
• OUTPERFORM: Industry expected to outperform the relevant broad market benchmark
• MARKET-PERFORM: Industry expected to perform in-line with the benchmark
• UNDERPERFORM: Industry expected to underperform the benchmark

Analyst Certification

• The primary analyst certifies that the views expressed reflect their personal opinions.
• No compensation was directly or indirectly linked to the report’s content.
• The analyst has not traded in the stock covered in the past 30 days and will not do so for 3 business days after the report's release.

Disclosures

• The report is for informational purposes only and not investment advice.
• Past performance does not guarantee future results.
• CMBIS is not a registered broker-dealer in the U.S., and the report is only for major U.S. institutional investors.
• In Singapore, the report is distributed by CMBI (Singapore) Pte. Ltd., an Exempt Financial Adviser.
• In the U.K., the report is only for high net worth individuals or entities.

Conclusion

Momo is navigating a challenging transition with Tantan, which is expected to cause short-term financial and user growth pressure. However, the company's core business is performing well, and management is optimistic about recovery in the second half of 2021. CMBIS has adjusted its earnings forecasts but maintains a HOLD rating and a target price of US$15.0, advising investors to wait for clearer signs of Tantan's reform.