20210722-西牛证券-CHESHI-01490.HK-Exploration_of_new_monetization_ways_32页_1mb

Cheshi (01490.HK) Summary

Core Content Overview

Cheshi (01490.HK), now rebranded as Cheshi Technology, has been actively exploring new monetization avenues in 2021, including the expansion into SaaS services and digital marketing solutions. The company primarily serves the automotive marketing industry, offering advertising services to automakers, dealers, and advertising agencies. In addition to its traditional business, it has introduced "車市寶" and "好賣車" as SaaS offerings, targeting distributors and sales staff, respectively.

The company has also developed short video content and a Picker engine, which enhances advertising efficiency and traffic monetization. The Picker engine allows for real-time data collection, analysis, and ad optimization across its extensive network of business partners and proprietary platforms.

Cheshi's IPO in early 2021 raised approximately HKD 1.5bn, with proceeds allocated to strengthen market position, R&D and IT systems, future investments, and working capital. The company has a strong leadership team, with Mr. Xu Chong as the CEO and sole shareholder of Congshu Beijing, a key subsidiary.

Main Points

SaaS Services

• "車市寶": A proprietary sales and marketing solution for auto distributors, offered on a CPS basis. It includes sales lead management, ad campaign management, and access to the company's database.
• "好賣車": A CRM-like app for auto manufacturers' sales staff, currently free to existing customers. It enables content distribution, direct contact with customers, and sales lead analysis.
• SaaS business model: These services are expected to complement existing advertising business, with potential for standalone offerings in the future.

Digital Marketing Solutions

• Content creation: Cheshi generates PGC (Professionally Generated Content) and UGC (User Generated Content), including reviews, price trend analyses, and short videos.
• Content distribution: Content is distributed across proprietary platforms such as "Cheshi (網上車市)", "Hao Che Shi (豪車事)", and "Pika Cheshi (皮卡車市)", as well as over 1,000 third-party platforms.
• Traffic monetization: Cheshi monetizes user traffic through Online Advertising Services and Transaction Facilitation Services, which include group-purchase events, sales lead conversion, and advertising performance tracking.

Recovery from the Pandemic

• The Chinese automotive market was well contained by 2020 Q2, leading to a rebound in ad spending.
• Cheshi's top-line revenue rebounded by 41.2% in Q1 2021 and 21.4% in 2H 2020, indicating a strong recovery from the impact of the pandemic.

Valuation

• The company is valued using DCF for traditional business and P/S for SaaS.
• Stock Rating: BUY
• Target Price: HK$1.25
• Forward P/E: 14.8x (2021), 11.1x (2022), 9.6x (2023)

Risk Factors

• Slow recovery in automobile sales
• Chip shortage affecting auto supply
• Intense competition for traffic
• Slower monetization progress of SaaS business

Key Financial Highlights

Strategic Initiatives

• Expansion into SaaS: Launched in 2021, with "車市寶" as the first monetized SaaS service.
• Short video content: Distributed on WeChat, Bilibili, Douyin, Kuaishou, and other platforms.
• Picker Engine: A key tool for ad optimization, real-time analytics, and large-scale content distribution.
• IPO Proceeds: Used to solidify market position, strengthen R&D and IT, expand services, and increase working capital.

Company Background

• Founder: Mr. Xu Chong, who joined Cheshi.com in 2003 and became the sole shareholder of Congshu Beijing in 2017.
• Congshu Beijing: Acquired Cheshi.com in 2015, and later became 95% owned by Mr. Xu with 5% by Mr. Li, a prominent KOL.
• Cheshi Holdings Limited: Established in late 2018, listed in Hong Kong in early 2021.

Industry Overview

• New Passenger Automobile Market in China: Sales volume grew at a CAGR of 0.4% from 2015 to 2019, but dropped 5.9% YoY in 2020 due to the pandemic.
• Market Growth: Expected to reach 22.1mn units in 2024, driven by increased demand, affordable prices, and government incentives.
• Tier-three and Below Cities: Account for 56.8% of sales in 2019, with stronger growth due to lower saturation, looser policies, and improving income.
• Automotive Advertising Industry: Total ad spending rose from RMB 33.5bn in 2015 to RMB 42.0bn in 2019, with a CAGR of 5.8%. CIC forecasts RMB 49.4bn in 2024.
• Online Automotive Advertising: Penetration rate reached 45.6% in 2019, expected to grow to 58.4% in 2020, driven by increased online usage and content preference.

Conclusion

Cheshi (01490.HK) is transitioning from a traditional advertising provider to a multi-platform SaaS and digital marketing solutions provider, with a clear vision to enhance advertising efficiency and customer engagement. The company's recovery from the pandemic and diversified revenue streams support its growth prospects, while the rebranding and new business models signal a new era in its development. Despite challenges such as chip shortages and competition, the company is well-positioned for future growth.