20230802-招银国际-汇量科技-01860.HK-Eyes_on_upside_from_ROAS_mode_6页_816kb

Mobvista Inc. (1860 HK) Company Update Summary

Core Content and Key Insights

Mobvista Inc. (1860 HK) is a leading player in the ad-tech and mar-tech space, with a strong focus on enhancing its advertising performance through advanced algorithms and strategic partnerships. The company's performance in the second quarter of 2023 is expected to be moderate, with a forecasted revenue growth of 14% YoY and an adjusted net profit of US$6.02 million. Despite challenges from a high interest rate environment and reduced ad budgets from long-tail game developers, Mobvista is expected to maintain profitability due to improved efficiency and cost control.

Looking ahead to the second half of 2023, the company is projected to experience stronger momentum with revenue growth exceeding 30% YoY. This is attributed to two main factors: the ROAS (Return on Advertising Spend) mode, which has been optimized to attract midcore and hardcore game ad budgets, and deeper collaboration with Google, which is anticipated to provide additional growth opportunities.

Main Points

• 2Q23E Performance:

  • Revenue growth is expected to be 14% YoY, slightly lower than the previous estimate of 22%.
  • Adjusted net profit is estimated at US$6.02 million, with an adjusted net margin of 2.4%.
  • Gross margin is expected to improve sequentially to 19.7% in 2Q23E.

• 2H23E Outlook:

  • Revenue growth is forecasted to exceed 30% YoY, driven by ROAS mode and Google cooperation.
  • The company's long-term margin improvement is anticipated due to narrowing losses from Reyun, higher ad efficiency, and reduced incentives.
  • AIGC (Artificial Intelligence Generated Content) initiatives, such as XMP tools, are expected to further optimize ad efficiency and analytics capabilities.

• Earnings Forecast:

  • The financial forecast remains unchanged, with the target price set at HK$6.3.
  • This target price is based on a SOTP (Sum of the Parts) valuation, using a 30x P/E for the ad-tech business and a 3.3x P/S for the mar-tech business.

• Stock Performance:

  • Current price is HK$3.85, with a 63.6% upside to the target price.
  • The company has a market cap of HK$6,234 million, with a 12-month price performance showing a positive trend.

• Shareholding and Ownership:

  • Seamless Technology holds 63.2% of the shares, followed by GIC (8.0%) and Citigroup (4.7%).

• Financial Highlights:

  • Revenue Growth: Expected to grow at a CAGR of 31% from FY23 to FY25E.
  • Gross Margin: Projected to increase from 19.9% in FY23E to 20.1% in FY25E.
  • Adjusted Net Margin: Expected to rise from 2.1% in FY23E to 2.5% in FY25E.
  • Operating Margin: Projected to increase from 1.5% in FY23E to 2.3% in FY25E.

• Valuation and Comparables:

  • SOTP valuation estimates place the equity value at HK$10,441 million, with a target price of HK$6.3.
  • The company is compared to global and domestic ad-tech firms, as well as SaaS companies, with a focus on financial metrics like P/E, P/S, and EPS CAGR.

Key Information

• ROAS Mode: Enhanced algorithm is expected to improve ad efficiency and attract more budgets from midcore and hardcore games.
• Google Cooperation: Further collaboration is anticipated to drive revenue growth in the second half of 2023.
• Margin Improvement: Long-term margin improvement is expected due to reduced costs and better targeting.
• Target Price: HK$6.3, with a 1.2x P/S and 58x P/E multiple for FY23E, and 1.0x P/S and 40x P/E for FY24E.
• Earnings CAGR: Expected to grow at 31% for FY23-25E.

Analyst Ratings

• CMBIGM Rating: BUY, indicating a potential return of over 15% over the next 12 months.
• Analyst Certification: The report is certified to reflect the analyst's personal views and to ensure no conflict of interest in the recommendations.

Disclosures

• The report is for informational purposes only and should not be considered as investment advice.
• CMBIGM does not guarantee the accuracy or completeness of the information provided.
• Investors are advised to consult with a professional financial advisor before making any investment decisions.

Conclusion

Mobvista is positioned for long-term growth with its enhanced ROAS mode and strategic partnerships, particularly with Google. Despite short-term headwinds, the company is expected to deliver consistent profitability and margin improvement. The BUY rating and target price suggest strong investor confidence in its future performance.