Supported by an upgraded smart bidding system, Mobvista delivered strong quarterly results, with revenue/adj. net profit +23%/97% YoY in 1Q24. Its verticals expansion effort (e.g. ecommerce and social media) continued to bear fruit, with non-gaming business revenue contribution up to 29% in 1Q24 (vs. 19.5% in 1Q23). Intelligent bidding products contributed over 60% of Mintegral revenue. As the overhang eased with a settlement agreement signed for Reyun transactions, we suggest investors refocus on its organic fundamentals improvement. We remain positive on FY24E’s Mintegral momentum (forecasting rev +20% YoY) and earnings growth (+91% YoY). Maintain BUY with unchanged earnings forecasts and TP at HK$6.0.
　　Solid 1Q24 with continued margin expansion. Mobvista reported strong
　　1Q24 results, with rev +23% YoY, 3% below our estimate. By segment, ad- tech/mar-tech revenue was +23%/19% YoY, in which programmatic advertising was resilient at +25% YoY. Adj. net profit surged 97% YoY to US$8.9mn, 4% above our estimates. GPM reached 20.5% in 1Q24 (+1.3ppt YoY), mainly on higher ads efficiency and disciplined cost of mar-tech business. Coupled with operating leveraging in S&M and G&A, adj. NM continuously improved to 2.9% in 1Q24, +0.7ppts QoQ/+1.1ppts YoY.
　　Upgraded smart bidding system bearing fruit. In 1Q24, Mintegral rev
　　accelerated to +25.4% YoY (vs. +19.5% YoY in 4Q23). With infrastructure upgrades and continued investment, the ROAS smart bidding model has become the main choice for developers in Mintegral. Benefiting from bidding system upgrades, Mobvista has achieved eye-catching performance in new verticals expansion. Apart from midcore and hardcore games penetration, Mobvista’s non-gaming business rev share climbed up to 29% in 1Q24 (vs. 19.5% in 1Q23, +83% YoY). Among non-gaming categories, ecommerce and social media emerged as key drivers. Looking ahead, we remain positive on Mobvista’s top line resilience (forecasting +20% YoY in FY24E) and enhancing profitability.
　　Overhang eased with settlement agreement signed for Reyun
　　transactions. On 14 May, Mobvista announced that the company and sellers (owning 18.56% of equity interest of Reyun) entered into a settlement agreement, with US$23.5mn payment to terminate the rest of acquisition.
　　We expect this settlement agreement to lift the overhang around Reyun acquisition (high valuation but still in net loss position).
　　Maintain BUY. We keep our FY24-26E earnings forecasts unchanged, with SOTP-based TP at HK$6.0 (by assigning 20x FY24E P/E to ad-tech biz and 3.0x FY24E P/S to mar-tech biz). Risks: macro uncertainty; slower ROAS adoption; and higher-than-expected investment in intelligent bidding system.