Market sentiment heated up, and the first full-year profit of the Group released a stable signal of long-term value

In the past period of time, the Chinese stock market storm has been endless, and after a period of trough, it has ushered in a sharp rise, and the market sentiment has also fluctuated. Under this market volatility, the release of financial reports by Chinese stock companies is facing uncertainty.

It is said that uncertainty is the biggest competitor to investment, but if you find a certainty of the enterprise, the direction will not be wrong.

After the US stock market on March 15, EASTERN TIME, Huanju Group released its 2021 Q4 and annual financial reports, of which the first annual profit, large repurchase dividends and other highlights have received a lot of attention. Before the market on March 16, under the influence of macro factors, Huanju Group rose 29.48%, and its certainty may be verified.

From another point of view, behind the toughness is not only high-quality performance, but also the ability to withstand the test. Huanju Group is not a new enterprise, but the market sentiment is heating up, and it is worth re-examining the company's logic.

The three waves of China's mobile Internet going to sea

Proven businesses are always more reliable, both in the capital markets and in the business markets. The overseas camp in which Huanju Group is located has roughly gone through three stages.

The first stage is before 2013, mainly cleaning, housekeeping and other tool APP out of the sea, vertical field began to have new forces sprouting. However, at that time, the market was mainly positioned to meet the needs of standardization and lacked innovation.

The second stage is 2013-2016, e-commerce, financial services and other models began to go global, using global mergers and acquisitions and model replication and other means, achieved some achievements, but did not play enough localization advantages in the fierce competition. For example, in Latin America, Heavyweight players such as AliExpress and Southeast Asian shopee are fighting, but the winner is the local homegrown e-commerce mercadoLibre.

These two stages also give some strategies for the sea action, such as grasping the core needs of users, such as the focus on localized operations. In the third stage after 2017, many latecomers have achieved results. One data that can be used to support this is that in the February non-game manufacturers' overseas revenue list data.ai statistics, Huanju Group ranked second, second only to ByteDance, which holds the Tik Tok ace.

From the specific non-game application overseas revenue list, BIGO Live, a subsidiary of Huanju Group, has been in the top three. The advantage of mature overseas companies is that the way of thinking about providing quality content and services has changed. In terms of data, THE CUMULATIVE REVENUE OF BIGO, THE OVERSEAS BUSINESS SEGMENT OF HUANJU GROUP, WAS 2.32 BILLION US DOLLARS FOR THE YEAR, AN INCREASE OF 34.1% YEAR-ON-YEAR, AND FOR THE FIRST TIME ACHIEVED AN ADJUSTED NET PROFIT OF US$182 MILLION.

Driven by high-quality products, Huanju Group achieved revenue of US$2.619 billion in 2021, an increase of 36.5% year-on-year. Achieved non-GAAP adjusted full-year net profit of $109 million for the first time (excluding the divested YY Live business). How does Huanju Group fill the moat of globalization with localized living water?

What does it take to win the "hearts and minds"?

Operation is the core of the third wave of going to sea, which can essentially reflect the true color of sea enterprises. Excellent companies make profits, great companies win hearts and minds, and how does The Gathering Group do it?

Everyone needs to reap the benefits of Internet products, but after crossing geographical intervals, everything is very different. Lian Meng, a partner at IDG Capital, said at the "2017 IDG VIEW" conference: "The world is unobstructed and fragmented beyond reach." This separation can be interpreted as elements at many levels: in terms of content form, it is necessary to provide enough forms to meet the sensory needs of users; in the core of cultural management, it is necessary to build different content ecology with diversified operational means; in product strategy, we must pay attention to different forms of user preferences and seize market segments. Huanju Group is the executor.

The form of the content can hit the senses directly. Last year was the Great Year of the Meta-Universe, from the virtual concert of Fortnite to the explosion of Liu Yexi, netizens around the world are exploring a new world between virtual and reality. In the fourth quarter, Bigo Live launched a new interactive function of "virtual anchor", supplemented by gameplay such as virtual background of single-person live broadcast scenes, which increased the average start time of Q4 by 12.1% year-on-year, and the total start time increased by 8.3% year-on-year. At the annual Bigo Live Annual Gala, the virtual anchor 3D avatar debuted on stage, singing alongside thai singer The Toys. Immersive social experiences make many users feel new and engaged.

The cultural core can cross the background to make users feel the resonance. At the Annual Gala of Bigo Live, Bigo Live invited about 100 anchors from different cultural and linguistic backgrounds to achieve cultural exchange and communication in a way unique to the Internet. In order to select the most influential anchor of the year, Bigo Live has linked a number of world landmarks, from Times Square in New York to the Burj Khalifa in Dubai, United Arab Emirates, bigo's image is also deeply rooted in the hearts of the people. In the fourth quarter, Bigo Live MAU grew 11.9% year-over-year to 32.2 million, and they came from more than 150 countries around the world.

Product matrix and design, grasping different user preferences. Although short videos and live broadcasts are the mainstream of the global Internet, the real global user thinking will certainly not give up those traditional and huge market segments. Huanju Group is still concerned about the demand for online multi-person interaction, and its global multi-person group interactive social product Hago recorded a 54.6% increase in the annual camp, and the number of paid users in the quarter increased by 33.9% year-on-year. Among them, in the fourth quarter, Hago launched a differentiated room recommendation strategy, which promoted the channel penetration rate by 2.2% month-on-month.

Higher than the company's strategic primacy is the user's choice. There are two levels of users, one is the consumer audience of the content, and the other is the creative producer. The reason why Huanju Group can be sought after by users on the consumer side is more important because of its strategic support for creators.

For example, like the short video Likee, in the fourth quarter, Likee launched the Superfollow subscription service function in some regions, supporting content creators to publish exclusive content to paid subscribers, and charging a monthly subscription fee, and users can support their favorite creators. In December, creator Superlike revenue increased nearly 6 times from September. There is support and there is motivation, and in the fourth quarter, the number of Likee certified creators increased by 22% sequentially.

Therefore, users with different regions, cultural backgrounds, and consumption preferences are destined to present different business characteristics, but it is precisely because of the difficulty of differentiation that the achievements of Huanju Group are more valuable. The platform-creator-user is essentially an ecological flywheel, and the ideas contained in it can span geographical and human distances. Commercialization cultivated by localization and diversification has its own unique determination in all situations, which is the universality of long-term value.

The concentration and confidence of the back wave

If today's surge in Chinese stocks is a victory for those who have persevered since last year, then Huanju Group's achievements are a matter of course: Huanju Group announced a repurchase of US$200 million in shares in September 2021; on the day of the release of the third quarter results in November 2021, Huanju Group announced an additional US$1 billion in share repurchases on top of the previous repurchases.

This is the largest buyback in the history of Huanju Group. As of the fourth quarter, Huanju Group paid US$160 million in dividends and repurchased US$393 million for the whole year, with a cumulative dividend and repurchase amount of US$553 million. If calculated at the market value as of press time, the amount of this part of the feedback to shareholders has reached 28% of the market value.

This is a sign of confidence that, in addition to the aggressive momentum in the business, it still has $4,685.2 million in cash and cash equivalents as of the fourth quarter, and cash flow from operating activities of $150 million. In addition, non-GAAP earnings per ADS for the fourth quarter were $1.15, with new dividends awaiting payment.

In addition to confidence, the trend of underestimation is also obvious. Positioning the world, achieving high stickiness users, and constantly improving the ability to monetize, today's market likes to criticize the inner volume, and it is rare that there are companies that do not have internal volumes, but they are ignored. 0.36 times PB and 1.78 times PS are placed in the current environment, which is an irrational valuation that does not make sense in the general environment. The temporary rise and fall of stock prices is the trend, but the underlying logic that supports the development of the company is the business. Short-term look at volatility, medium-term look at the trend, long-term only belongs to logic.

In November 2021, Morgan Stanley gave Huanju Group an "overweight" rating with a target price of $80, a judgment based on normal logic.

Last year, Frost & Sullivan, a global corporate growth consultancy, released the "2020 Emerging Market Social Platform Development White Paper", which predicts that the global social networking market will reach $264.4 billion by 2024, of which emerging markets have a very large growth space, and the golden age belongs to brands such as ByteDance and BIGO under the Huanju Group.

Sometimes, the premise of long winds and waves is that a large ship like the Huanju Group that has experienced the ups and downs of the waves and can withstand the rough waves is needed.