To The Moon

$Racer-W (01024)$ The market sentiment was more pessimistic after the announcement of 24Q2 earnings. Although revenue and profit for the quarter exceeded expectations and margins reached a new quarterly high, investors seemed to be more concerned about the downside of the e-commerce business, which included both broader issues in the overall consumer industry and concerns about the company's overall strategy.

Key financials

• Revenue: Fastlane reported revenue of 30.98 billion yuan in Q2 2024, up 11.6% year-over-year, beating market expectations of 30.37 billion yuan.

• Profit: gross profit was 17.135 billion yuan, up 23% year-over-year, while adjusted net profit was 4.679 billion yuan, up 73.7% year-over-year.Gross profit margin and adjusted net profit margin reached 55.3% and 15.1%, respectively, both of which were single-quarter highs.

Business Performance

1. Online Marketing Services:

   Revenue reached $17.5 billion, up 22.1% year-over-year.Although the growth rate slowed down from 27.4% in the first quarter, the growth was still quite strong.The growth in outbound marketing services was particularly notable, especially in the media and information, e-commerce platform and local life sectors.Average daily marketing consumption of paid skits more than tripled year-on-year, demonstrating user acceptance of new forms of marketing.

2. E-commerce Business:

   Total transaction value (GMV) of the e-commerce business grew 15% year-on-year to $305.3 billion.The number of monthly active buyers grew 14.1% to 131 million, with a record high penetration rate of 18.9%.The supply side performance was equally strong, with the average number of monthly moving merchants increasing by more than 50% year-on-year, demonstrating that Fastlane's market presence in the e-commerce space is growing.

3. Overseas Business:

   Overseas revenue reached 1.1 billion yuan, up 141.4% year-on-year, with online marketing revenue up over 200%.Although the overseas business was still in the red (a loss of 277 million yuan), the loss was reduced by 64.5% year-on-year, showing an improving trend.

4. Live Streaming Business:

   Revenue from the live streaming business was $9.3 billion, a 6.7% decrease year-over-year.The decrease was due to the company's efforts to build a healthy live-streaming ecosystem, which could lead to fluctuations in revenue in the short term, Crypto said.

5. Other services:

   Other services revenue increased 21.3% year-over-year to $4.2 billion, primarily due to growth in the e-commerce business.

6. Users:

   Average DAU was 395 million, up 5.1% year-on-year; MAU continued to decline sequentially to 692 million, up 2.7% year-on-year, but below the market expectation of 699 million.Fast hands hope to get higher customer acquisition efficiency through marketing, but in fact the effect is less than expected.While the DAU/MAU ratio is high, the average daily usage time of users on the Quick Hands app is 122 minutes, and user stickiness has improved.

Key Investment Points

What To Surprise

1. Advertising growth was relatively stable.Online marketing service is benefited by "short drama", the average daily marketing consumption of paid short drama increased more than 2 times year-on-year, and the total consumption of customers using UAX for marketing placement accounted for more than 30% of the total consumption of out-cycle marketing.

2. Overseas business loss reduction. q2 overseas revenue reached 1.1 billion yuan, year-on-year improvement of 141.4%, of which online marketing revenue year-on-year growth of more than 200%, overseas business operating loss of 277 million yuan in the second quarter, a year-on-year reduction of 64.5%.

3. The effect after the rectification of live broadcast is better than expected.Previously active content rectification, as well as the rectification of the live broadcast industry, have brought some impact on the business, with more introduction of labor unions, the growth of anchors as well as stickiness is also higher, Q2's live broadcasting revenue also slightly exceeded expectations.

4. Continue to reduce costs and increase efficiency to improve profitability.Gross margin and operating profit hit new highs as the revenue side exceeded expectations and optimization of costs began, with management and R&D expenses continuing to shrink.However, marketing expenses from customer acquisition in the current market are still likely to put pressure on the company.

What to Worry

1. E-commerce data may be poor and guidance may slow down.E-commerce GMV is weakening across Q2, including Fastrack's big promotion for 618, partly due to the declining consumer sector itself, but also from competition in the industry - after all, platforms that are now rolling in low prices have a relatively thick base.The management is not interested in

2. There is no further boost to buybacks.Q2 buybacks have been reduced a bit relative to Q1 and the current buyback program is a 36-month maximum of HK$16 billion, which has not been boosted.The company is also will adjust the repurchase intensity according to the stock price situation.As for investors, the entire Hong Kong stock market is currently not abundant in liquidity, and company buybacks will become an important buyer force.