On September 3, Bank of China Securities released the Enjoyment Group (6988.HK) company research report, believing that the company's overseas e-commerce is progressing smoothly, developing new brands and categories, and improving gross margin; that the central enterprise mixed reform company will focus on high-quality film and television investment opportunities; and that the domestic business layout has been strategically adjusted to maintain the “buy” rating.
According to the results announcement for the first half of 2023 recently released by Enjoy Group, the company's revenue for the first half of the year was HK$2.148 billion, an increase of 57.2% over the previous year.
Among them, sales revenue from overseas e-commerce products reached HK$1,944 billion, +90.4% year-on-year. In the first half of the year, Enjoy Group successfully expanded new well-known consumer electronics suppliers. Local cooperative distributors in Southeast Asia grew rapidly, up 82.99% compared to the end of 2022.The MARTOP platform has begun to expand sales of non-mobile phone categories such as tablets to seize more market share. Enjoy Group officially launched overseas e-commerce business in Southeast Asia from 21Q4. Bank of China Securities said that since 2020, the region has been China's largest trading partner for three consecutive years. Per capita income has grown rapidly, and there is broad scope for short video e-commerce development.
Bank of China Securities is also concerned about the increase in the gross margin of the Enjoying Group's overseas e-commerce.In the first half of the year, the gross margin of the company's overseas e-commerce business was 6.94%, an increase of 1.75 percentage points over the previous year.At the same time, the company's sales expenses rate was 14.8%, an increase of 12 percentage points over the previous year. Bank of China Securities believes this is mainly due to a sharp increase in overseas business promotion expenses.
In the Entertainment Technology business sector, after carrying out an equity restructuring with the central enterprise Poly Pictures Investment, Poly Entertainment Technology was established. It mainly develops film and television investment, MCN, etc., and cultivates 1P's own traffic for marketing and monetization. Bank of China Securities believes that subsequent companies will focus on high-quality film and television project opportunities to invest. In terms of new technology, the company launched its own blockchain “Poly Entertainment Technology Chain” in 2022, connecting to the film and television entertainment digital asset service platform “Kukane” and the first batch of external ecological partners.In the first half of the year, Enjoyment Group successfully developed a digital holographic display system combining digital human and AI technologies and applied it in the cultural tourism industry.
In terms of domestic algorithmic marketing business, Bank of China Securities is concerned that Enjoy Group has strategically adjusted domestic digital marketing and Douyin e-commerce business. The company's domestic short video e-commerce marketing business reached GMV of HK$255 million, a year-on-year decrease of 17.9%; it achieved revenue of HK$149 million, an increase of 28.5% over the previous year. According to Bank of China Securities analysis, GMV declined but revenue increased mainly because the company added customers and electronics categories with a high share ratio, and this revenue has already been included in the net amount method.
Overall, according to Bank of China Securities analysis, 2023-24 is a critical period for Enjoying Group's overseas e-commerce business to acquire markets.It is expected that gross margin will continue to increase with the diversification of categories, and marketing channel subsidies will gradually decline as distribution networks expand.Bank of China Securities expects Enjoyment Group's business losses to narrow sharply in 2024, turn losses into profits in 2025, and maintain a “buy” rating.