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Wen/Lian He
Source/Market Value List (ID: shizhibang2021)
On the evening of March 29, the company handed over its second annual report since its listing.
In 2021, Fasthand is still in the stage of rapid growth, with the annual overall revenue of 81.08 billion yuan, up 37.9% year on year. From the perspective of profit, Fasthand has not yet made a profit, but the net loss rate has narrowed significantly. One reason for the improvement of the profit side is the rise of gross profit margin.
At the performance call held in the evening, Jin Bing, the chief financial officer of Fasthand, said in response to the questions of analysts that Fasthand was "very confident" that it would realize the net profit after quarterly domestic business adjustment within the year.
Jin Bing said that the path to achieve this goal quickly is relatively clear. "On the one hand, with the development of advertising, e-commerce and other high margin businesses, the overall gross margin is expected to continue to grow. On the other hand, in terms of expense management and control, we will continue to strengthen refined operation management, maintain the downward trend of customer acquisition and maintenance costs, and it is expected that the absolute value of sales and marketing expenditures this year will not be higher than last year. ”
In the past year, Fasthand has experienced several organizational restructuring. First, in June, we quickly reorganized the user and product teams, broke the original growth department structure, and put the overall growth business under the management of a unified person in charge.
Three months later, Fasthand made the largest organizational restructuring since its establishment, transforming its business from a functional based structure to a business division based structure. Besides the production and transportation line of the main station, it set up four business divisions: e-commerce, commercialization, internationalization, and games.
In October, Suhua resigned as CEO, and Cheng Yixiao took over, quickly changing the "dual core" operation model of the past nine years. Suhua was responsible for the strategy and the new direction of the company's development, and Cheng Yixiao was responsible for specific business.
The drastic reform of the organizational structure is a decision that must be made to quickly grow to the current stage:
Now Fasthand is a large company with more than 20000 employees. It needs a more efficient and flexible management mechanism; Fast hand is no longer a product that was previously driven by the main station. Multiple business lines need to be driven by a more refined operation model; The industry competition is getting fiercer and fiercer, and fast hand needs to take a stronger fighting posture.
Did the quick organization adjustment work? What changes have taken place in the financial report? And how much room for its growth, and how much imagination there will be in the future? This article will focus on answering these questions.
How good is the financial report?
Eleven years ago, GIF Fasthand, a tool software for users to produce and share GIF dynamic maps, was born. After experiencing the extension of a number of businesses and the exploration of cashing methods, Fasthand became the domestic head short video platform.
Today's Fasthand, its mobile applications include Fasthand master station, Fasthand Extreme Edition and Fasthand Concept Edition.
In terms of content, fast hand mainly uses short videos and live broadcast to obtain traffic; There are three main ways of realization. Advertisers' placing, live broadcasting of virtual gifts and e-commerce constitute the main revenue sources of online marketing services, live broadcasting and other segments in the annual report.
The overall revenue of Fasthand in 2021 is 81.08 billion yuan, with a year-on-year growth of 37.2%. For the revenue of nearly 100 billion yuan, it can maintain a growth of nearly 40%, and the growth is still very high.
When it comes to quick hand, it is hard to avoid the problem of loss.
In terms of absolute value, in 2021, after excluding share based compensation expenses and changes in the fair value of convertible redeemable preferred shares, the adjusted net loss of Fast Retailing will be 18.85 billion yuan.
From the perspective of the year, since the organizational structure adjustment of Fasthand in June, the overall losses of Fasthand in the second half of the year have narrowed. In the fourth quarter, the adjusted loss was 3.569 billion yuan, 22.7% lower than that in the third quarter.
For an unprofitable enterprise, capital reserve is very important. How about quick hand?
In 2021, Fasthand will be listed in Hong Kong shares, raising more than HK $41 billion. By December 31, 2021, there will be 36.4 billion yuan in cash and short-term deposits on the book, and 8.84 billion yuan in financial assets such as stocks or similar stocks that can be easily realized. There will be no short-term interest bearing liabilities. The liabilities are mainly accounts payable and notes, which can occupy upstream funds, Basically no pressure on repayment 。
In addition to occupying upstream funds, advance receipts formed by users' pre recharging for rewards and other forms are also funds that can be used at the disposal of Fast Hand. Plus, some reasons for reducing net profits are not real cash outflows, such as some preferred shares that may be redeemed in the future. High losses of Fast Hand did not bring huge cash outflows.
In 2021, the net outflow of fast hand business activities will be 5.52 billion yuan, far less than the loss. Therefore, as long as the rhythm of investment activities can be controlled, fast hand will not have capital pressure.
From the perspective of profit rate, the net loss rate of quick hand will be reduced from 198.44% to 96.3% in 2021. In the year, the adjusted net loss rate in the fourth quarter of 2021 is 14.6%, 7.9 percentage points higher than that in the third quarter.
One reason for the improvement of profit side is the rise of gross profit margin.
In addition to the growth of revenue, another message conveyed by the figure above is that the revenue structure of Fasthand has gradually shifted from live broadcasting as the absolute pillar to online marketing and live broadcasting, and e-commerce is becoming an important growth point. In 2021, the three businesses will account for 52.6%, 38.2% and 9.2% of the revenue respectively.
Among them, online marketing will grow by 95.2% year on year in 2021. Against the background of the overall recession of the advertising industry, this achievement will benefit from the growth of traffic and also be related to the improvement of advertisers' experience brought by precision marketing.
The growth of traffic is divided into two aspects, one is the size of users, and the other is the stickiness of users.
In the fourth quarter of 2021, monthly activity of Fasthand will be 578 million, with a year-on-year increase of 21.5%, and daily activity will be 323 million, with a year-on-year increase of 19.2%. The year-on-year growth of monthly activity and daily activity is the highest in the four quarters.
Adding common users is the first step, and the more important step is to keep users on the platform.
From the perspective of user stickiness, in the fourth quarter, the total flow of fast users increased by 57.6% year on year, significantly higher than the monthly growth rate. In other words, the length of users' stay was increasing. The deeper reason lies in the quick optimization of content, which will be detailed below.
The improvement of advertisers' experience falls on the data, that is, the online marketing service revenue for the average daily active users is increasing, which will be 82.6 yuan in 2020 and 138.4 yuan in 2021.
On the one hand, the efficiency of online marketing business is improving, and on the other hand, its cost is lower than that of live broadcasting business. In the live broadcast business, the fast hand gives the anchor a higher share, which is also the most important part of the overall cost.
Therefore, with the decline of the proportion of live broadcast business, the gross profit rate of Fasthand has shown a steady upward trend. The gross profit rate of 2021 will be 42%.
The increase in gross profit rate caused by structural change is actually a quick move to tilt the allocation of resources such as organization and management to business departments with higher efficiency and return.
During the growth of content platforms, how to expand the circle of users and increase the scale of users is a major issue. Therefore, content platforms will invest heavily in sales and marketing, and sales expenses are the most likely factor to drag down net profits.
In 2021, the rate of quick selling expenses will decline significantly on a month on month basis. The rate of selling expenses in the four quarters will be 68.5%, 58.9%, 53.8% and 41.9%, respectively. This reflects the improvement of customer acquisition efficiency, refined operation and other strategies have achieved results.
Has growth peaked
To explore whether the growth of fast hand has peaked, we should look at it from two dimensions:
The first dimension is whether the main site app still has enough room for growth, that is, whether more people will use fast hand and stay longer in fast hand; The second dimension is whether fast hand commercialization can grow at a high speed.
Good looking user data is not the decisive factor for the speed of commercialization, but a larger user group and higher user stickiness can increase the commercialization chips and raise the upper limit. In order to achieve more healthy growth, both are very important.
Previously, Cheng Yixiao mentioned on the third quarter financial report conference that the overall DAU of China's short video industry is expected to reach 1.1 billion, and the medium-term goal of Fasthand is to reach 400 million DAUs.
400 million is a phased goal for fast hands. As time goes on, this number will further increase to 500 million or 600 million, but its competition with peers will become more intense, because more and more users will overlap, and the competition for users' limited time will become a zero sum game.
There is still market space. Fasthand has the opportunity to continue to gain the growth of user data. As for whether it can achieve this, it depends on its ability. From the 2021 financial report, Fasthand shows a trend of continuous growth in multidimensional data such as DAU, MAU, and user duration.
Then look at the growth of fast hand commercialization. This section focuses on online marketing services from the following aspects:
First, whether the advertising loading rate has room for improvement.
In 2021, the fast hand Ad Load will be about 6% - 7%, which is still some distance from the upper limit of 15% generally recognized. To make a simple comparison, the ad loading rate of Fasthand is only slightly higher than that of beep beep, far less than 14% of dithering.
Second, can the advertising unit price be increased.
From Q1 to Q3 in 2021, upstream game, education and other advertisers were affected by industry regulation, and the overall bidding environment was poor, leading to a callback of eCPM. However, there was a recovery trend after Q4.
CITIC Securities pointed out in a research paper that in January 2022, the release of game advertising has significantly recovered, with a share of 27%.
Third, whether the fast hand inner circulation advertising can continue to grow.
The advertising business of Fast Hand can be divided into two modes: external circulation and internal circulation. External circulation advertising means that advertisers directly put brand advertising and effect advertising on fast hand; The inner circulation advertising refers to the advertising launched by the merchants and anchors who carry goods live in quick order to gain more exposure. At present, the inner circulation advertising contributes about 30% of the advertising revenue to Fast Hand.
Internal circulation advertising is closely related to e-commerce business. It depends on whether it can continue to grow, and it needs to focus on whether the quick selling e-commerce marketing ecosystem is complete.
Fasthand launched Magnetic Taurus in May 2021, which helped it further connect public and private traffic, improve marketing efficiency, and provide closed-loop e-commerce marketing solutions for businesses. In the long run, internal circulation advertising is expected to drive the fast hand advertising business to achieve rapid growth.
How much growth space does e-commerce have?
After talking about advertising, let's look at the e-commerce business of Fasthand. At present, its revenue contribution to Fasthand is not high, but it may contribute more in the future.
Fast hand e-commerce started in 2018, and then GMV showed a rapid attitude, reaching 680 billion yuan in 2021, as shown below:
Previously, the monetization rate of fast e-commerce was at a low level, only about 1%, lower than the 3% - 4% monetization rate of traditional e-commerce.
Orient Securities pointed out when talking about this point earlier that "the low monetization rate is partly due to the commission rebates of the platform to high-quality merchants/talent, and partly because the fast hand GMV transactions are not completely completed in the station, and the fast hand GMV transactions that jump to the outside of the station cannot charge a discount from the merchants."
To solve this problem, Fasthand needs to form an e-commerce closed loop internally.
In February 2022, Fasthand announced that since March, third-party platforms will not be able to release product links in Fasthand. In fact, as early as Q3 of 2021, the GMV contribution rate of fast stores has increased to 90%. By the end of 2021, fast stores will upgrade the alliance of good things to fast distribution, basically completing the closed loop of commercialization.
However, if fast e-commerce wants to further grow, it is far from enough to "make up lessons". It depends on whether it can form differentiation advantages and operate more efficiently.
The current development strategy of fast e-commerce is "four big businesses": big trust e-commerce, big brands, big service providers, big industrial belts. Before that, Fasthand put forward in March last year that the core logic of the "live e-commerce 2.0 era" is the upgrading from the traditional "commodity+public domain" human goods market thinking to the "content+private domain" thinking.
In other words, fast e-commerce business is based on content+private domain traffic.
On the content side, Fasthand used to focus on short dramas, sports content, pan knowledge content construction, star ecology, and the richness and diversity of content have been improved.
On the side of public and private domain construction, Su Hua and Cheng Yixiao mentioned in the summer seminar of Fasthand last July that the expansion of Fasthand in the public domain was basically in place, and then we should focus on making the private domain unique, and constantly improve the private domain solution and business model.
At the 2021 Magnetic Conference of Fast Hands, Ma Hongbin, the person in charge of Fast Hands commercialization, mentioned the "New Marketplace Commerce", pointing out that "Marketplace with smoke, fire and humanity is naturally similar to the culture of Fast Hands community". The discovery page, selection page, attention page and home page of Fast Hands correspond to the markets, shopping streets, communities and stores in the traditional Marketplace. He believes that in the business ecology of Xinshijing, the full integration of public and private domains provides the possibility of global marketing.
On this basis, looking at the "four big undertaking", fast hand is actually ready for commodity supply side, consumption side, and the service side of the industrial ecological chain.
After it basically gets through all links of the entire industrial chain, the overall operating efficiency of fast e-commerce will also become higher.
Is the valuation in the end?
One year after listing, Fasthand's performance in the capital market was not good, and its share price once fell 80% from its peak.
External reasons cannot be ignored. Throughout 2021, China Concept stocks are falling sharply. Due to the linkage between the Hong Kong market and the US market, the dismal situation of China Concept shares, combined with the recent international environment, triggered the decline of Hong Kong stock related companies.
Dolphin Think Tank has previously analyzed that during the quick listing period in early 2021, the secondary market's valuation system for short video companies gave up the P/E ratio, P/B ratio and DCF valuation method These analysis models based on the company's fundamentals, to a certain extent, are the absence of rationality, The market mentality behind this is the anxiety of chasing the tuyere, and also the aversion to the loss of missing the tuyere.
At the same time, however, he believed that the subsequent decline in the stock price of Fast Hand was not the "bubble collapse of short videos" exaggerated by the outside world. Under the influence of the general environment, the decline of the market value of fast hand is also irrational:
In the past year, especially from the second half of 2021, the company's top-down actions, including organizational adjustment, commercialization acceleration, ecological closed-loop, public and private domain construction, have not been fully reflected in the stock price.
This is why, since the end of last year, many coupon dealers have made optimistic predictions about fast selling.
Morgan Stanley (Morgan Stanley) has previously raised its rating of Fast Hand to "overweight", believing that the market's expectation of Fast Hand has bottomed out. The organizational restructuring of Fast Hand in the past few months has begun to promote better liquidity and operational efficiency; JPMorgan Chase (Xiaomo) also gave the rating of "quick sell" for the first time, with a target price of HK $120. It believed that "quick sell" would enter a stage of continuous profit improvement in the next few quarters, driving the stock price up in 2022.
Orient Securities, Dongxing Securities, Everbright Securities, Guosheng Securities, etc. are also optimistic about fast hand. They believe that in the past year, fast hand's adjustment based on organization, business, commercialization and other aspects will continue to drive the company's efficiency.
It can also not be ignored that the importance of ESG is beginning to highlight in the capital market.
ESG is an investment concept and enterprise evaluation standard that focuses on corporate environmental, social and governance performance rather than financial performance. Based on ESG evaluation, investors can observe the ESG performance of enterprises, evaluate their investment behavior and the contribution of enterprises in promoting sustainable economic development and fulfilling social responsibilities.
In the past few years, Fasthand has done two things with its high radiation and strong influence in the sinking market:
The first is to drive the continuous improvement of digital service facilities in rural areas. From January to October 2021, more than 420 million agricultural product orders will be sent from rural areas to all parts of the country through fast moving live broadcast e-commerce; Over the past three years, more than 20 million people have been earning income every year, many of them from remote areas.
More specifically, Fasthand has actually achieved four points: helping agricultural products go up, high-quality industrial products go down, upgrading traditional agriculture, and cultivating rural revitalization talents.
The second is to stimulate employment and create new employment opportunities. Liu Chao, an online celebrity in the blue collar recruitment industry, helps nearly 5000 migrant workers find jobs a year by using his Fasthand service number. In December last year, Liu Chao, together with Ningde Times and local competent departments, held a live job fair in Fasthand, attracting 250000 people to watch, and more than 1000 people left their registration contact information.
In addition, Fasthand also launched a series of public welfare projects and social responsibility oriented projects.
For example, it has built a new coral public welfare interaction platform "Fast Coral", calling on users to plant coral online through short videos and live broadcast of multiple activities. Every time a user completes a coral planting online, experts from Quickhand, the Amity Foundation PADI Ocean Special Fund and the South China Sea Institute of Oceanography, Chinese Academy of Sciences will work together to match the next coral on the seabed in the name of the user.
The above points are the concrete embodiment of the value of quick hand "inclusive".
Su Hua previously wrote in the preface of the book "The Power of Being Seen" that he proposed a mission for the fast hand team, which is to improve everyone's unique sense of happiness.
How to do this? Su Hua believes that, The bottom logic of happiness is the allocation of resources: "What we need to do quickly is to be fair. We should try to raise the tail and press the head down in resource matching to make the allocation a little more even... When we are doing resource allocation, between resource equality and efficiency, and under the condition that efficiency and loss are acceptable, freedom and equality can be in the front row. ”
Now it seems that Fast Hand has begun to find a balance between efficiency and inclusive benefits. Behind it is higher efficiency and further inclusive benefits. This is a process in which a company's growth and social responsibility move forward simultaneously. This process is far from over. Time will prove its value.
