Technology-driven performance has grown significantly, and Friend Holdings is accelerating its matrix expansion steadily

Since March, Friend Holdings (01450) has successively set new highs for the year, quietly embarking on a pleasing "five consecutive rises" trend. After achieving a revenue growth of over 150%, optimistic financial data will also add some upward momentum to the stock price.

As a technology-driven new retail company, Friend Holdings has always adhered to using live streaming as a tool, experience as the core, and efficiency as the support to build a channel brand that businesses and consumers trust. In the current gradually improving market sentiment, Friend Holdings is expected to see both performance and stock price move upward in a "Davis double-click".

Outstanding Annual Performance Growth New Media Business Net Profit Nearly 200 Million

According to the Zhitong Finance APP, Friend Holdings is a leading full-service media provider in China, mainly providing all-round video application services to radio stations, new media platforms, industry clients, etc., including product sales, video content production, live streaming, and system operation and maintenance services.

From the annual report data, in the complex internal and external economic situation in 2023, the company's performance continued to show strong growth momentum, and its self-generating ability has been validated by performance. Throughout the year, the company achieved revenue of RMB 1.074 billion, a significant year-on-year increase of 152.4%; the adjusted net profit was RMB 180 million, with a growth rate of 601.3%. Excluding the one-time fair value rollback of about RMB 17 million for the radio and television business, the actual adjusted net profit of the new media business reached about RMB 197 million.

During the reporting period, the company's gross profit margin remained high, increasing by 6.2 percentage points to 52.8% compared to 46.6% in 2022, continuously improving profitability; the live e-commerce business grew strongly in adversity, with an annual gross merchandise volume (GMV) of about RMB 12 billion, nearly doubling compared to the same period in 2022.

It is reported that during the 2023 Double 11 shopping festival, Friend Holdings' total GMV on the three platforms of Douyin, Taobao, and JD.com exceeded RMB 2.483 billion, a year-on-year increase of 178% over last year; the total platform order volume exceeded 7.47 million, with over 187 million viewers for the Double 11 event, and 15,377 items listed. Following the sale of a domestically produced commercial satellite in March in a live broadcast room, the first domestically produced large cruise ship "Ada·Magic City VIP Customized Tour" successfully attracted about 10 million viewers, greatly increasing exposure. In the past two days, the world's first "certified on-the-job" domestically produced air taxi was sold in Friend Holdings' Taobao live broadcast room, creating the world's first transaction of an unmanned aerial vehicle carrying passengers online since the birth of e-commerce platforms As of now, Jiaoge Pengyou has more than 30 live broadcast rooms on various e-commerce platforms such as Douyin, Taobao, and JD, and the matrix live room operation mode is effective; with over 50 million live broadcast fans, it accurately targets consumer groups and achieves high conversion rates.

Through the standardized, replicable, and scalable "matrix vertical live room operation" model, Jiaoge Pengyou is gradually growing into a new retail company that empowers live broadcasts throughout the chain with technology. The outstanding financial performance undoubtedly proves that the company is on the right path of development.

Technology Empowers Live Broadcast Chain, Diversified Vertical Matrix Accelerates Scalable Expansion

In recent years, the new retail format of "live streaming + e-commerce" has accelerated, with both market size and penetration rate rapidly increasing. According to analysts from China Industrial Research Institute, the transaction scale of live e-commerce in China is expected to reach 4.5657 trillion yuan in 2023 and 5.5639 trillion yuan in 2024. The penetration rate of live e-commerce transactions in China is projected to increase from 1.6% in 2018 to 25.3% in 2022, with an expected penetration rate of 31.9% in 2023 and a potential 35% in 2024.

After experiencing the brutal growth stage of traffic grabbing, the live e-commerce industry has now entered a stage of high-quality development, continuously improving standardization and professionalism, and moving towards maturity.

In the second half of the rational return of live e-commerce, the judgment criteria that used to focus solely on traffic are no longer effective. Compared to competing for a certain internet celebrity KOL or "super anchor" for product promotion, a company's supply chain, brand strength, and infrastructure will be more critical in enhancing market competitiveness.

At this juncture, Jiaoge Pengyou has made new attempts in business models and business logic starting from the live e-commerce business.

By creating a "matrix vertical live room operation" model that is diversified in platforms, anchors, and categories, Jiaoge Pengyou has successfully expanded on a large scale, with extensive layouts in various fields such as liquor and food, beauty and skincare, trendy clothing, sports and outdoors, tea and tea sets, snacks and convenience foods, commuting clothing, parenting lifestyle, children's clothing, and home living.

As of now, the company has achieved over 50 million live broadcast fans, served consumers cumulatively 1.2 billion times, with a total broadcast duration of over 70,000 hours across 30 standardized matrix vertical live rooms, and cumulative sales of 1 million SKUs. By using live broadcasts to build the "Jiaoge Pengyou" channel brand, it has accumulated exposure to over 38 billion people.

Different from traditional live broadcast companies that focus on cultivating internet celebrity KOLs and monetizing through anchor fans, Jiaoge Pengyou relies more on standardized operational capabilities and digital innovation capabilities to build the matrix of scalable live rooms into an "online department store" operation model Specifically, a large number of amateur anchors under the umbrella of Jie Ge Peng You will take on a role similar to shopping guides, guiding consumers to discover higher quality and more cost-effective products. The company's professional team will provide nanny-like services from product selection to after-sales service, while the digital advantages will help achieve efficient and precise user engagement and sales conversion.

Through a standardized and replicable matrix live streaming operation model, not only can all-day coverage be achieved in more segmented product categories, but also dependence on a single product category and a single channel can be eliminated. This will focus live streaming content more on the product level, enhancing the sustainable development capability of live streaming accounts.

According to Zhitong Finance APP, in recent years, Jie Ge Peng You has been actively exploring the application of business intelligence (BI) in the e-commerce field. The company's independently developed "Friend Cloud" platform utilizes technologies such as big data and artificial intelligence to achieve data-driven and intelligent processes throughout the entire live streaming e-commerce chain. Efficiency improvements in decision-making and management have been achieved in various aspects such as talent recruitment, merchant settlement, popular product recommendations, cold product calculations, and product selection.

During the product selection and planning stage, the market monitoring function can provide references for product selection and live streaming strategies in live streaming rooms; during the live streaming stage, real-time updates on conversion data and refund situations allow anchors and operations to dynamically adjust live streaming strategies; in the post-event review stage, further segmentation of basic data and integration into data models have effectively enhanced the company's refined operational capabilities.

With the continuous increase in vertical account numbers and live streaming rooms, the costs of manual processing and time have also increased. Jie Ge Peng You leverages "technology + talent" to empower the live streaming e-commerce business. By importing accumulated data for online visual processing, time and manpower costs are saved. The massive data provided by the diversified live streaming matrix will also benefit the company, continuously iterating and optimizing the specialization and intelligence of large models.

It is foreseeable that Jie Ge Peng You's operation model centered on content and experience will continuously enhance consumer experience and word-of-mouth, helping achieve long-term quality growth in performance. The leading advantages in big data and AIGC capabilities will continue to help the company reduce costs and increase efficiency, achieving "accurate, fast, good, and cost-effective" outcomes, creating greater value for consumers and merchants.

Looking ahead, Jie Ge Peng You will continue to increase its investment in technology to empower the live streaming field, continuously improving the efficiency and accuracy of product selection and live streaming through data-driven approaches. By rapidly expanding through standardized live streaming rooms, the penetration rate of products and consumer groups will be accelerated. Deepening the layout of industrial belts, providing users with high-quality and cost-effective products to enhance user stickiness, while creating efficient online customer acquisition channels for manufacturers, breaking the dilemma of manufacturers' difficulty in directly reaching consumers.

Furthermore, with the trend of going global becoming a new trend in the e-commerce industry, the company will actively layout in overseas markets to create a diversified growth curve. As the cross-border e-commerce industry is intensively welcoming policy favors, overseas markets are expected to bring new growth opportunities to the company.

Conclusion

Looking back at 2023, Jie Ge Peng You Holdings has won more than 20 awards from government or media, and its growth potential has been widely recognized by the market. At the Douyin E-commerce Ecological Conference, the company won the awards for the Annual Influential Author and the Annual Influential MCN Institution. At the 30th China International Advertising Festival, it won the 2023 Annual Business Value Institution Award. The short videos jointly produced by the company and the live broadcast event "Great Nation's Heavy Machinery" also won international and domestic top marketing awards such as the "Effie Award" and the "Great Wall Award" Whether it is the impressive performance or the comprehensive improvement in operational data, it has already verified the sustainable high-quality growth path of making friends. According to research reports from relevant institutions, the company's price-earnings ratio is much lower than the valuation level of peer companies, making it a high-quality target with great cost-effectiveness. With future profit release, there is an opportunity for market valuation recovery; from a business perspective, making friends, with technological innovation as the engine, gradually growing into a new retail company, its true value is also expected to be reassessed