1H22 results impacted by macro factors; recovery in recent months
- Weimob’s 1H22 results were impacted by macro factors.
- We believe that the most challenging period for Weimob is behind it, as its operations have been recovering in recent months.
- We have a lower SOTP-based target price of HK$7.55, mainly because we lowered our target multiples to reflect slower-than-expected growth, given macro factors.
- Weimob’s share price was under pressure after its 1H results announcement. Although market sentiment is turning conservative, we believe that Weimob’s B2B business is on the recovery track, and we reiterate our ADD rating.
1H22 results recap
Weimob’s total revenue decreased 6.2% yoy from Rmb959.4m in 1H21 to Rmb899.6 m in 1H22, primarily due to lower revenue from Merchant Solutions. Revenue from Subscription Solutions increased by 5.7%, from Rmb549.6m in 1H21 to Rmb581.1m in 1H22, primarily due to more paying merchants, from 101,867 in 1H21 to 103,616 in 1H22 and an ARPU increase from Rmb5,395 in 1H21 to Rmb5,608 in 1H22. Gross billings from Merchant Solutions decreased from Rmb5.64bn in 1H21 to Rmb4.21bn in 1H22, primarily due to a decrease in average spend per advertiser, from Rmb205,223 in 1H21 to Rmb157,193 in 1H22. Owing to economic headwinds, Weimob’s client profile for Merchant Solutions cut
or controlled their advertising budgets, so average spend per advertiser dropped significantly. Revenue from Merchant Solutions decreased by 22.3%, from Rmb409.8m in 1H21 to Rmb318.5m, as a result of the change in gross billings.
Strategy for 2H22
In 2H22, Weimob will focus on the several key areas. It will focus on moving up-market, and increasing the value per client. It will continuously strengthen its strategic investment in moving up-market, maintain its leading position in the fashion retail industry, further increase the proportion of revenue from moving up-market, and continuously increase its unit value. Weimob will improve the product strength of WOS and create new engines for business growth. Based on seven core products, namely, transactions, CRM, WeCom, CDP, traffic, shopping guides and statistics, Weimob will outsource more in-depth personalized development to third parties and build an ecosystem through the Weimob Cloud market. It will provide more solutions portfolios for cross-selling to meet the needs of merchants to the maximum extent. Weimob will also intensively cultivate its ecological capabilities to expand the scale of client penetration and further deepen the ecological value, introduce more third-party developers through the Weimob Cloud Platform, WOS, the new commercial operating system, etc., to strengthen the in-depth distinct development, help clients enhance value, and achieve a two-way guarantee in respect of client value and ecosystem partners. Weimob will help merchants reduce customeracquisition costs, and improve customer communication and management through three channels in the private domain – “WeCom Assistant, OneCRM and CDP+MA” – to provide comprehensive, integrated private domain product solutions for merchants. In 2H22, Weimob will continue to expand its business footprint, deepen business arrangements for business cloud, marketing cloud and sales cloud, and enable enterprises to achieve new growth through its products and technologies. Weimob will deepen TSO full-chain operations and expand its service scenarios. It will support the smart growth of its clients through private domain talent training plans, process standardization and large-scale replication, the Kylin (??) system for operational efficiency improvement, deepening industry practices, creating full-domain growth models, expanding the scope of private domain, etc.