We expect Mobvista’s 2Q23E results to be moderate, with solid profit (estimated at US$6.02mn) but mild rev growth (forecasting rev +14% YoY, vs. previous estimate of +22%). The high interest rate environment limits ads budget from game developers in 1H23E. Looking ahead, we expect stronger momentum in 2H23E (forecasting rev >30% YoY growth), backed by:1) ROAS mode with enhanced algorithm to attract midcore & hardcore game ads budget; and 2) further upside from deeper cooperation with Google. We are positive on its long- term margin improvement, with narrowing loss of Reyun, higher ads efficiency and lower incentives. We keep our earnings forecast unchanged. Maintain BUY with SOTP-based TP at HK$6.3 (1.2x/1.0x FY23/24E P/S, or 58x/40x FY23/24E P/E, with 31% earnings CAGR in FY23-25E).
　　Expecting solid earnings in 2Q23E despite ads headwinds. After a solid start in 1Q23, we expect 2Q23E rev to accelerate (forecasting rev +14% YoY).The growth should be slightly moderate (vs. previous estimate of +22%), mainly due to: 1) shrinking ads budget from long-tail game developers in challenging macro and high-interest-rate environment, as developers focus more on existing games and in-app purchase monetization; and 2) limited contribution from Google cooperation in early stage. However, we expect bottom line to remain intact at US$6.02mn in 2Q23E (implying adj. NPM at 2.4%), for its higher efficiency and better cost control (e.g. cloud expenses).GPM should improve sequentially to 19.7% in 2Q23E (+0.5ppts QoQ), supported by better targeting and enhanced algorithm.
　　High visibility for 2H23E to accelerate with ROAS mode and cooperation with Google. We expect Mobvista to deliver stronger momentum in 2H23E (forecasting rev >30% YoY growth), boosted by: 1) further upside from deeper cooperation with Google, and 2) algorithm optimization in in-app purchase of ROAS mode to attract rising budget from midcore & hardcore games.Mintegral rev accelerated in Jul, with strong game season. Midcore and hardcore games vertical would continue to climb up, in our view. In terms of margin, we keep full-year forecast unchanged (adj. NM at 2.1% in FY23E). In the long run, Mobvista would benefit from AIGC initiatives (e.g. XMP tools), to optimize ads efficiency with rich formats and stronger analytics capability.
　　Maintain BUY. We maintain our financials forecast unchanged, with 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).