Global macro challenges and inflation dampened Mobvista’s 2H22E ads momentum (Mintegral rev slowed to +13% YoY in 4Q22). However, we suggest to look into its FY23E reacceleration (forecasting rev +25% YoY in FY23E), backed by: 1) vertical expansion; 2) China’s reopening; and 3) cooperation with Google. As priority on profitability upgraded, we expect FY23E margin enhancement to continue with lighter incentives and stabilized R&D (forecasting GP/adj. NP +27%/110% YoY in FY23E). We forecast Mobvista to deliver 22%/74% topline/bottom line CAGR during FY22-24E. Resume with BUY with SOTP-based TP at HK$6.3 (1.2x/1.0x FY23/24E P/S, or 58x/40x FY23/24E P/E).
Looking beyond 2H22E slowdown. We expect Mobvista rev +18% YoY in FY22E, with adj. net profit at US$11mn (vs. -US$39mn in FY21). Mintegral rev slowed down to +13% YoY in 4Q22, disrupted by shrinking ads budgets amid global macro challenges and inflation. Nativex rev would decline 70% YoY in FY22E as Mobvista further shifted towards programmatic ads. Despite 2H22E headwinds, we are positive on its margin improvement in FY22E with disciplined traffic subsidies (forecasting blended GPM +3.5ppts to 19.6% in FY22E).
Priority on margin expansion with quality growth. Looking into 2023E, we expect Mobvista to reaccelerate with 25% rev growth, boosted by: 1) continuous vertical expansion, with rising hardcore games and ecommerce budget; 2) increasing demand from domestic clients (>30% rev contribution) after China’s reopening; 3) better targeting with algorithm optimization; and 4) further upside from cooperation with Google. With priority on profitability upgraded, we see high visibility for Mobvista to continue to improve its margin in FY23E, backed by: 1) higher ads efficiency with lighter incentives; 2) R&D investment to stabilize; and 3) narrowing loss of Reyun. As such, we expect its bottom line +110% YoY in FY23E, with GP +27% YoY.
Long-term synergies from Mar-tech biz. We expect Mar-tech rev +50% in
FY23E, accounting for 1.5% of total rev. Its SaaS ecosystem with GA, Reyun, and SpotMax, would not only bring more synergies with Mintegral ads in the long run, but also see narrowing loss ahead.
Resume with BUY. We set our SOTP-based TP at HK$6.3 (by assigning 30x FY23E P/E to ad-tech biz and 3.3x FY23E P/S to mar-tech biz). Waiting for more catalysts from: 1) Mintegral ads acceleration from 1Q23E; and 2) cooperation with Google.