Netjoy recently announced 2021 Annual Results. According to Zhitong Finance APP, this financial report of Netjoy released positive signals from multiple dimensions such as fundamentals and future business layout.

1. Core Business Scaled up to Another Record High, Profitability Remained Sustainable and Healthy with Remarkable Resilience

According to the financial report, the scale of Netjoy’s core business reached a new high in 2021. Year-over-year, gross billings increased by 61.3% to RMB 6.6 billion (same unit below); revenue of RMB 3.1 billion was up 21.2%; net profit reached RMB 117.4 million, a YoY increase of 13.3%.

Additionally, Netjoy proposed a final dividend of HK$ 5 cents per ordinary share, with a total dividend payment amount of approximately HKD 39.8 million, which also reflects the company’s sincerity in rewarding the long-term support of its shareholders.

According to the financial report data, it goes without saying that Netjoy’s performance has been strongly resilient. Firstly, in terms of revenue structure, the company’s online marketing business maintained stable growth, with revenue growing 19.8% year-over-year to RMB 3.07 billion in 2021, while the new business stream, SaaS services, began to make financial contributions with its first-year revenue of RMB 32.9 million, marking the company’s cloud service business has officially entered a new stage of commercialization.

In terms of profit performance, the company’s profit scale and profitability were both steadily improving. Most strikingly, the gross profit margin of Netjoy’s new SaaS service exceeded 98%, which was much higher than that of the online marketing solutions business. Considering SaaS service is one of the key aspects of the company’s development strategy and thus its proportion will further increase in the future, it is expected to greatly further increase Netjoy’s overall profitability.

Secondly, regarding operating metrics, the number of Netjoy’s clients was further expanded. The data shows that by the end of 2021, the company has provided services to 6,914 advertisers in 222 vertical sub-sectors, covering Internet services and tools, online games, e-commerce, financial services and other fields. Meanwhile, the number of advertisers served by the company during the reporting period increased by 21 to 882 as compared to the previous year-end. It follows that Netjoy has formed a solid foundation in two dimensions of both financial performance and business operation, which is rare under the current challenging macroeconomic environment.

2. SaaS plus Live Streaming Fuels Long-term Growth, Time to Seize a Massive Opportunity at the Overseas Blue Ocean Market

Based on Netjoy’s financial report, the development of the company’s two new businesses, short-video marketing SaaS service as well as brand live-streaming operation, is undoubtedly impressive.

For short-video marketing SaaS service business, Netjoy launched Tradeplus+ system in 2021 to effectively empower advertisers, advertising agencies and short video marketing service platforms to reduce costs and increase efficiency. It is reported that Tradeplus+ system can help clients save 50% of human capacity and enhance the utilization rate of materials by 50%.

Although the SaaS service of Netjoy is still at the early stage of development, its strong monetization potential has been initially revealed in the annual report. With the progress of the marketization of this business, it is foreseeable that the SaaS service could fuel massive future growth of the company’s profitability.

Moreover, the company’s brand live-streaming operation business is expected to become increasingly popular among brand clients in the new consumption era. On the one hand, a brand live-streaming operation has an inherent advantage in compliance: its essence is that it is operated by the brand itself instead of key opinion leaders (KOLs), meaning that the live-streamer is a normal employee and taxed based on the salary and thus there is zero possibility of crossing the legal line.

On the other hand, the brand live-streaming operation can direct the public traffic in the ecosystem to the brand itself – that’s to say, the private domain. Then, Netjoy helps the brand build and operate its private traffic pool to improve customer stickiness, retention and repurchase rate, thereby promoting both brand influence and sales conversion simultaneously.

In addition to these two new businesses aforementioned, the financial report also demonstrated that Netjoy intends to expand its business in the overseas short video market, and this move will introduce more possibilities to the company’s future growth. Unlike the domestic short-video marketing industry in China of which the market scale has reached a bottleneck, the overseas short-video market has enormous demands and the huge potential that are eager to be unleashed and therefore could create more opportunities to breed the new “giants”. By proactively expanding the overseas business, Netjoy can not only take a market share in the promising international market but also build strategic partnerships with top overseas short-video platforms or leading industry players to further improve the company’s comprehensive capabilities.

All in all, Netjoy has solid fundamentals and a promising future, from both the business dimension and the market dimension. With the blessing of its keen insight into the latest business trends and strong execution capability, we can expect Netjoy to efficiently capture emerging opportunities and propel continuous future growth.

3. The Company Has Been Chronically Undervalued, Price Appreciation is Worth Looking Forward To

Although Netjoy is a high-quality company with solid fundamentals and strong business performance, it has been undervalued in the capital market for a long time.

Zhitong Finance APP selected two US MarTech companies, HubSpot and The TradeDesk, as a comparison benchmark. HubSpot achieved revenue of USD 1.301 billion in 2021, with a price-to-sales ratio of approximately 18; TradeDesk had revenue of USD 1.196 billion in 2021, with a price-to-sales ratio as high as 27. In the same period, Netjoy’s price-to-sales ratio was even less than 1, only around 0.5 times.

Compared to its international peers, Netjoy is extremely undervalued. However, in the past year or so, it is not uncommon to see the long-term undervaluation of high-quality growth stocks in the Hong Kong stock market and even for the Chinese concept stocks in US stock markets. This irrational phenomenon confirms that Hong Kong stock market is currently “inefficient”, which is exactly the reason that the price of the stock deviates significantly from the intrinsic value of this company.

Even so, now is the perfect time for investors to enter the stock market and “buy the dip”. For investors, by taking advantage of the short-term “inefficiency” of the stock market to buy and hold undervalued stocks for the long term, it is highly likely that they can profit when the stock price returns to the intrinsic value or above in the future.

Specifically, Netjoy’s financial report revealed the company’s strong determination and superior capability to promote an enhanced industrial ecosystem layout. At present, the company’s new businesses, SaaS service, and brand live-streaming operation service, have been emerging and developing at a fast pace. If its capabilities and strengths in the short video field can be quickly replicated and applied to overseas markets, we could see a great growth momentum.

Accumulation leads to steady progress. We believe as the company continues to release growth signals, the undervaluation situation will soon be broken. Investors can remain optimistic about the prospect of Netjoy.

Share.