20210831-西牛证券-虎视传媒-01163.HK-Positive_development_direction_despite_a_slower_progress_in_China_7页_221kb

AdTiger (01163.HK) Summary

Core Content Overview

AdTiger (01163.HK) reported a top-line revenue of RMB 143.5mn in 2021 1H, showing a 16.7% YoY growth, while its bottom-line net profit plunged by 40.9% to RMB 13.8mn, aligning with expectations. The company's performance was mixed, with overseas markets recovering faster than anticipated, while China market growth was slower than expected, though it is expected to become a major contributor in the long term.

Key Financial Highlights

Revenue and Profitability

• Revenue: RMB 143.5mn in 2021 1H
• YoY Growth: 16.7%
• Net Profit: RMB 13.8mn
• YoY Growth: -40.9%
• Estimates Cut: 17.4% - 22.9% due to short-term setbacks and higher R&D expenses

Forward P/E Ratio

• 2021: 27.4x
• 2022: 12.0x
• 2023: 7.8x

Target Price

• HK$1.10 (from previous HK$1.35)

Main Points and Analysis

1. Positive Development Direction Despite Slower Progress in China

• The company maintains a "BUY" rating, indicating positive long-term potential.
• The overseas market outperformed expectations with a >30% YoY revenue growth.
• The China market is gaining importance, but its contribution to overall revenue is still emerging.
• The company is expected to maintain profitability by scaling down R&D investment to a more sustainable level.

2. Significant Dependency on R&D Investment

• AdTiger plans to invest in logistic systems, APPs, and AdTensor.
• Each RMB 5.0mn of R&D expenses affects the net profit margin by 1.3%.
• The appropriate R&D investment level for profitability is estimated at RMB 5.0mn – RMB 10.0mn.
• Despite the high costs, the company believes it can reduce R&D spending to a more sustainable level in the future.

3. China Market Expansion

• AdTiger entered the Chinese market in 2020 Q4, partnering with major platforms like ByteDance, Kuaishou, and iFeng.com.
• China advertising spending in 2021 Q2 reached RMB 44.6mn, up 1.3x QoQ.
• It accounted for 6.3% in Q1 and 12.2% in Q2 of total advertising spending.
• The company acknowledges slower-than-expected growth in China but remains confident in its long-term potential.

4. Overseas Market Recovery

• The overseas market showed stronger-than-expected recovery, with >30% YoY growth in advertising spending compared to 2020 1H.
• The Indian market, once a major contributor, remained weak due to political issues.
• The company forecasts double-digit growth in the overseas market for the coming years.

Financial Metrics

Key Risks

• Higher-than-expected costs for developing online shipment tracking and logistics management systems.
• Tighter data protection policies by Apple may reduce ad placement accuracy and increase user acquisition costs.
• Intense competition in the Chinese market could hinder expansion.
• Slower-than-expected progress in new business development (e.g., App development and SaaS service).
• Escalating geopolitical conflicts between China and other countries may reduce demand for overseas marketing.

Peer Comparison

Conclusion

Despite a mixed financial result in 2021 1H, AdTiger (01163.HK) is viewed as having a positive development direction, with a "BUY" rating maintained. The company is expected to benefit from overseas market recovery and long-term growth in the China market, even though its profitability is currently impacted by higher R&D expenses and lower margins. The target price of HK$1.10 reflects a revised outlook based on conservative assumptions about future growth and costs.