Investment positives
We initiate coverage of Mobvista Inc. (01860.HK) with an OUTPERFORM rating and a SOTP-based target price of HK$8.00.
Why an OUTPERFORM rating?
Leading global third-party independent advertising technology (ad-tech) platform. Backed by the programmatic advertising platform Mintegral and artificial intelligence (AI) algorithms, Mobvista enables app developers to boost user growth and monetize traffic. The overseas traffic market is relatively fragmented, and we believe third-party independent ad-tech platforms represented by Mobvista have larger growth upside and stronger competitive advantages than big media platforms under the influence of Apple’s new Identifier for Advertisers (IDFA) policy. We attribute the competitiveness of third-party ad-tech platforms to their unique traffic coverage and differentiated algorithms. According to AppsFlyer’s report in March, Mintegral ranked No.4 on the AppsFlyer Retention Index, the only Chinese third-party ad-tech platform among the top-5. As Chinese mobile app developers expand their business overseas, we believe Mintegral will see stronger competitive advantages and enter more vertical industries based on its mature algorithms, maintaining steady revenue growth.
Providing full-life-cycle growth solutions for mobile app developers. Based on its advertising platform, through M&A and independent R&D, Mobvista is developing marketing technology (i.e. martech) capabilities such as statistics analysis, ad placing effect monitoring, and ad material management. The company targets mobile app developers’ pain points in different development stages and provides comprehensive marketing tool kits that leverage advanced technologies. As a full-life-cycle growth solution provider, we expect Mobvista to increase customer stickiness and customer lifecycle value moving forward.
Central technology platform strategy to empower front-end businesses. Thanks to its central technology platform strategy, Mobvista has developed infrastructure layers and inference engines to support the company’s front-end businesses and optimize operating efficiency. The central technology platform can be decoupled from specific business scenarios or function modules. Therefore, Mobvista can commercialize its mature mid-office products and enrich its software-as-a-service (SaaS) product portfolio.
How do we differ from the market? We are upbeat on the fundamentals of Mobvista’s businesses, and believe the Mintegral platform is recovering from previous headwinds. As more Chinese mobile app developers are seeking business overseas, we believe Mobvista has differentiated competitive advantages and expect it to become even more competitive moving forward.
Potential catalysts: Recovery of Mintegral platform from previous headwinds; revenue from Martech solutions grows faster.
Financials and valuation
We expect the company’s EPS to be US$0.00 in 2022 and US$0.03 in 2023, implying a CAGR of 596%. We initiate coverage of Mobvista with an OUTPERFORM rating and a target price of HK$8.00 (based on 2022 SOTP valuation), implying 8x 2022e P/GP (gross profit). The stock is trading at 1x 2022e P/S, our TP offers 46% upside.
Risks
Uncertainties during expansion into new verticals; changing international environment; regulatory issues; goodwill impairment.