Based on more optimistic revenue expectations, we have revised our revenue forecasts upward while maintaining a 'Buy' rating with a target price of HK$5.79. Considering the improved revenue outlook for Vobile （the “Company”）， we raise our 2023 revenue forecast by 1.7%, resulting in an adjusted 2023 revenue projection of HK$2.09 bn. We anticipate a YoY revenue growth of 44.9% for the Company in 2023. The forecasted growth encompasses both Vobile's ongoing efforts to increase penetration rate and coverage among crucial international IP holders, and the expansion of customer base in China.
　　Vobile's revenue has witnessed an exceptionally high YoY growth of 80.3% in 1H23. However, its gross margin has slightly decreased from 41.4% to 39.2% compared to 1H22. The overall operating expenses have remained steady and even experienced a slight decrease, accounting for 28.9% of the total revenue, down from 29.7% in 1H22. The marginal decline in operating margin, from 11.7% to 10.3%, can be attributed primarily to the decrease in gross profit margin and the increase in financial expenses. Overall, Vobile attained an EPS of HK$0.0132, up 17.9% YoY. We believe that as Vobile's services penetrate further into the Chinese market, economies of scale and gross margin for the Company will gradually improve.
　　We remain optimistic about the Company's ability to sustain high-speed revenue growth over the coming years while progressively improving profitability. While Vobile's gross margin might experience short-term fluctuations due to revenue structure changes from Particle Technology's merger and the expansion of overseas teams, our confidence in the Company's long-term profitability is rooted in these factors: 1） Driven by increased customer demand, the renewal and initiation of cooperative contracts are poised to bring more-than-expected revenue growth for the full year of 2023. Notably, a revised cooperation agreement with a key client, Warner Bros, contributed nearly HK$100 mn in Vobile's revenue for 1H23. 2） Vobile's cultural export strategy for Chinese film and television content has achieved notable success. The content export services to Mango TV, Douyin and clients linked to the Ant Group collaboration are estimated to contribute around HK$200 mn in revenue in 2023.
　　Recent collaborations between Vobile and prominent platforms such as Douyin, Mango TV, and Bilibili highlight the strong endorsement of Vobile's content protection services by influential Chinese online video platforms. This underscores the increasing awareness of copyright protection in China, and also reinforces our belief in the Company's potential to replicate its successful overseas social platform monetization model in China.