Greater clarity after the dust settled down
? Like some of its peers’, NetJoy’s 2021 performance (especially 2H21) w as negatively
impacted by policy, which w as the key reason for the much low er-than-expected results.
? The Company’s growth in 2022–2024 w ill be driven by a recovery in its online market
solutions business (with the normalization of government regulations) and continued
grow thin its livestreaming and SaaS business.
? The COVID-19 outbreak (lockdowns) created near-term pressure, but for full-year 2002,
the Company reiterated its gross billing target.
? Gross profit margin improvement and improving cash flow are the two major medium-term rerating catalysts.
? We reiterate our ADD rating and low er our target price (TP) to HK$4.03 (based on 20x
2022 P/E, in line with our target P/E for its listed peers). The downward revision in our
TP is due to: a) low er net profit forecasts and b) a reduction in the target P/E from 30x
to 20x.
Resumed growth in 1Q22
NetJoy announced that it recorded gross billings of Rmb1,965m in 1Q22, representing a
yoy increase of 20.5% and a qoq increase of 34.3%. The business mix may be different,
but gross billings can be treated as a proxy for the Company’s revenue growth. In our view,
the figures indicate that the Company is back on the growth track after a challenging 2H21
(especially 4Q21) because of government policy and the macro environment. The
Company w ill focus on several areas to drive future growth: a) consolidating its diversified
media cooperation network, deepening cooperation with top domestic short-video
platforms, and broadening its overseas short-video market at the same time; b)
strengthening R&D and the application of the latest digital technology, accelerating the
upgrade of its platform technology and service capabilities, and enhancing the application
capabilities of AI technology in multiple commercial scenarios to get w ell-positioned for
virtual-reality commercial scenarios in the future; c) continuing to closely monitor and follow
market trends, further diversify its business footprint, and accelerate the establishment of
its presence in emerging businesses, such as brand livestreaming operations, brand cross-border services, the maker economy and local lifestyle; and d) actively pursue strategic
partnerships, investments and acquisition opportunities to improve its overall capabilities
and develop its short-video marketing services ecosystem.
SaaS and livestreaming are two growth drivers
To meet growing market demand, in 2021, NetJoy deployed its excellent technical
capabilities in big data management and the large-scale production of short videos on a
platform to initiate the SaaS business with the launch of cloud service platforms such as
Tradeplus and hepai.video. In 2021, NetJoy successfully commercialized its cloud services
platforms, with first-year revenue of Rmb32.9m. The Company also actively expanded its
business landscape and further enriched its revenue streams by extending its capabilities
to new areas including the fast-growing brand livestreaming operations, brand cross-border services and the maker economy. NetJoy also continued to strengthen its algorithm
capabilities and the application of AI technology in the video field, and further improved its
video production capacity and advertising efficiency to meet the market’s higher
requirements for cost reduction and efficiency enhancement in all aspects of marketing.
We cut our net profit forecast for 2022F and 2023F by 56.7% and 58.9%, respectively, as
w e factored in low er revenue growth and gross profit margin. We reiterate our ADD rating
with a low er target price of HK$4.03.