Haitong International Initiates Coverage on WB-SW (09898) with "Outperform" Rating, Citing Unique Social Media Position

Stock News12-02

Haitong International initiated coverage on WB-SW (09898) with an "Outperform" rating and a target price of HK$107 per share. The firm highlighted WB-SW's stable user base and engagement metrics, noting the platform has entered a steady growth phase with moderated expansion compared to peers.

**Key Investment Highlights:** WB-SW remains a dominant social media platform in China, leveraging its vast user base, real-time viral content distribution, and strong celebrity influence to offer efficient marketing solutions for advertisers. The bank also emphasized the potential of generative AI to enhance content creation, targeted advertising, and trend discovery, further boosting monetization.

**Mixed 3Q25 Results:** Total revenue reached $440 million (down 5% YoY, 1% QoQ), in line with downward-revised Bloomberg consensus. Online ad revenue fell 6% YoY in USD terms (5% decline in RMB terms), while value-added services revenue rose 2% YoY to $66.9 million. Adjusted net profit of $110 million exceeded expectations by 3%, with a net margin 1 percentage point higher than consensus. Adjusted operating margin stood at 30%, down 6 percentage points YoY/QoQ.

**Outlook:** Q4 ad revenue is expected to show modest recovery, supported by e-commerce promotions like "Double 11," though categories like gaming, smartphones, and beauty remain weak. For 2026, full-year revenue is projected at $1.72 billion (down 2% YoY), with potential headwinds from reduced auto subsidies.

**User Engagement Strengthens:** Algorithm optimizations drove double-digit growth in user watch time and retention, while "Super Topics" participation also expanded YoY. WB-SW's AI-powered search feature now boasts over 70 million MAUs, with DAU and search volume surging 50%+ QoQ.

**Shareholder Returns:** Management reaffirmed its commitment to maintaining a ~30% adjusted operating margin for the year. Since 2020, WB-SW has consistently paid ~$200 million in annual dividends, with payout ratios of 58% (2023) and 64% (2024) of net profit.

**Risks:** Increased competition and macroeconomic weakness could pressure performance.

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