Duiba delivered soft 1H20 results, with topline -40% YoY and bottom line at -RMB23mn. We believe soft 1H20 was priced in given recent weak stock price, and suggest investors to move into 2H20E recovery. In the short run, Duiba's ads would bear pressure from ecommerce and finance segments in this epidemic, but SaaS momentum would continue in 2H20E, in our view. We cut its earnings by 62%/7%/4% in FY20/21/22E, but slightly lifted its TP to HK$4.1 by rolling over to FY21E P/E multiple. Wait for gradual ads & SaaS recovery. Maintain BUY with low valuation.
- Soft 1H20 priced in. 1H20 revenue declined 40% YoY, and bottom line at -RMB23mn, soft on outbreak of COVID-19, which has put pressure on ads budgets and the platform’s offline traffic, leading to a significant adverse impact on its interactive advertising business. By segment, ads declined 43% YoY, while SaaS surged 166% YoY. We expect Duiba to face a challenging year in FY20E, with soft ads demand.
- Moving into 2H20E recovery. As we stated in our previous report in Apr, we remind that Duiba’s ads demand to bear short-term pressure under COVID-19, and ads recovery would take more time. By ads category, ecommerce advertisers tend to face bid lower ad price with strict ROI-driven strategy, and players with cash on delivery would be hit by logistics disruption. Duiba's finance advertisers also face challenges, with weak credit card ads but resilient online banking ads. Looking ahead, we expect ads in Jul to recover to 2019 level, with solid ecommerce momentum. We forecast its 2H20E ads rev at RMB726mn in post COVID-19 period. SaaS business trend well, with rev estimate at RMB42mn in 2H20E (vs. RMB23mn in 2H19). Given macro uncertainty and ads peers performance, we think market has well anticipated the slower-than-expected ads recovery, and more eyes on its SaaS strategy. We cut its earnings by 62%/7%/4% in FY20/21/22E, to reflect ads challenges.
- Maintain BUY. We slightly lifted our TP to HK$4.1 from HK$3.5, by rolling over to FY21E multiple. Our TP is equivalent to 11x FY21E P/E. Wait for gradual ads & SaaS recovery. Maintain BUY with low valuation.
