Analysis of New Stocks in the US Stock Market | Seizing the short video marketing dividend for high growth, the big data group with impressive performance still faces hidden risks

After three months, Big Data Group (OCP.US) has made new progress in its listing on the US stock market.

After submitting the public version of the prospectus (F-1 document) to the SEC on March 29, Big Data Group updated the prospectus (F-1/A document) on June 28, and the offering range and fundraising scale were also announced.

Data shows that Big Data Group plans to issue 2 million shares of common stock in this IPO, with an expected price per share between $4 and $6, raising up to $12 million.

According to the Intelligence Finance APP, Big Data Group provides mobile advertising services in China through its operating entity Xiamen Kuangshi Alliance Network Technology Co., Ltd. Since launching its mobile advertising business in 2020, it has served approximately 280 advertisers.

In terms of performance, Big Data Group has achieved rapid growth. Its revenue for the 2023 fiscal year (12 months ending June 30) was $157 million, a year-on-year increase of 324.78%, with a net profit of $4.455 million during the period, a year-on-year increase of 253.85%. By the first half of the 2024 fiscal year (6 months ending December 30, 2023), although its revenue slightly decreased by 2.6% to $112 million, the net profit still saw a significant increase, rising by 73.6% to $1.262 million year-on-year.

Calculating based on the central price of $5 per share in this offering, Big Data Group's market value after listing will reach $75 million, corresponding to a static PE ratio of 16 times for the 2023 fiscal year. Therefore, investors are concerned about whether Big Data Group can sustain its growth to support this valuation.

Seizing the Industry Recovery and Short Video Trend to Achieve Rapid Customer Expansion

The continuous growth in performance by Big Data Group is partly attributed to the industry recovery. According to the "2023 China Internet Advertising Data Report," the elimination of the impact of the epidemic has led to the recovery of economic and commercial activities, resulting in an increase in advertisers' willingness to invest. After structural adjustments and resource optimization in 2022, China's internet advertising market showed growth again in 2023, with a year-on-year increase of 12.66% to 573.2 billion RMB.

In addition to the industry recovery, seizing the opportunity of the rise of short video platforms is a key reason for Big Data Group's performance growth far exceeding the industry average. According to the "2024 China Internet Audiovisual Development Research Report," as of December 2023, China's internet audiovisual user base reached 1.074 billion, with an internet user penetration rate of 98.3%. Among them, short video applications have the highest user stickiness, with an average daily usage time of 151 minutes per person, far ahead of other applications Due to the popularity of short videos, short video platforms have become a new battlefield for brand advertisers, changing the landscape of the marketing industry.

Based on this new trend in the industry, Big Data Group mainly adopts online short video advertising models for advertisers, leveraging the popularity of Chinese online short video platforms to bring in traffic and engagement from users. As of now, Big Data Group, which has been deeply involved in the advertising industry for many years, has established extensive connections with mainstream Chinese media platforms such as Douyin and Tencent. In the fiscal years 2022, 2023, and the first half of 2024, the company has respectively cooperated with 48, 197, and 92 mainstream media platforms and their agents. According to the company's official website, Tencent, Sina, 360, and others are all media partners of the company's "Kuangshi Alliance".

On the client side, thanks to seizing the opportunity of short video advertising, Big Data Group's client base has grown rapidly. The number of clients in the fiscal years 2022, 2023, and the first half of 2024 were 64, 238, and 120 respectively, including well-known enterprises such as Tencent, Huawei, and Vipshop.

Due to the significant increase in the number of clients in the fiscal year 2023, Big Data Group achieved a remarkable performance in revenue and net profit. However, it is worth noting that the net profit margin for the fiscal year 2023 was 2.8%, a slight decrease from 3.4% in the fiscal year 2022, mainly due to the increase in total operating expenses due to business expansion.

In the first half of the fiscal year 2024, Big Data Group's revenue slightly decreased by 2.6% to $112 million, mainly due to the impact of exchange rates. If calculated in RMB, the revenue increased by 0.4% year-on-year. Despite the slight decrease in revenue, the company achieved high-speed growth in net profit, mainly because Big Data Group started to focus on high-quality development, focusing on high-value customers, eliminating low-margin customers. This led to a 1 percentage point increase in gross profit margin to 3.2% during the period, and the company's cost control measures reduced operating expenses, thereby improving profitability. With these efforts, the net profit margin for the first half of the fiscal year 2024 was 1.1%, an increase of 0.5 percentage points.

Concentration of Customers Surges, with Single Customer Revenue Accounting for Nearly 30%

From the above performance analysis, it is evident that Big Data Group's current development is stable and positive. The company rapidly expanded its customer base in the fiscal year 2023, achieving rapid growth, and entered a phase of high-quality development in the first half of the fiscal year 2024, aiming for the release of net profit, undoubtedly enhancing the company's fundamentals.

Furthermore, in its prospectus, Big Data Group outlined a new business blueprint for investors, stating that it will explore opportunities to cooperate with overseas media platforms such as Google, Meta, TikTok, and Bing, and establish partnerships with agents of these international media platforms to meet the needs of Chinese advertising clients expanding into overseas markets From the third quarter of 2024, Big Data Group will enter the international mobile advertising market. At the same time, starting from the third quarter of 2024, it will explore the live e-commerce market in Southeast Asia, catering to the unique needs of local residents and promoting products that local customers like.

In recent years, Chinese private enterprises have accelerated their pace of "going global." According to a report released by iMedia Consulting in August 2023, among Chinese enterprises that have implemented a "going global" strategy, small and medium-sized enterprises account for 39.4%, 17.5%, and 13.6% respectively. The globalization capabilities of Chinese enterprises continue to improve, and this trend is expected to continue.

If Big Data Group can successfully expand into overseas markets, it will seize the second new trend in addition to short videos. This may further open up the growth ceiling of Big Data Group. It is necessary to continue monitoring the expansion of its overseas business in the future.

In addition, Big Data Group still faces several potential risks that investors should pay attention to. Firstly, the intensification of market competition is a major risk that Big Data Group faces. After all, the company's net profit margin is only in the low single digits. If market competition intensifies, it will inevitably affect its profitability. Currently, a large number of marketing companies have entered the short video field. If market competition continues to intensify, there may be a possibility of price wars in the future.

Secondly, the high-quality development in the first half of the 2024 fiscal year also brings certain risks. Although Big Data Group has focused more energy and resources on customers with higher profitability and reduced the number of low-margin customers, its customer concentration has significantly increased. According to the prospectus, as of the six months ended December 31, 2023, the combined revenue of the top five customers of Big Data Group accounted for 53.4%, with the largest single customer accounting for as high as 28.4%. In contrast, the revenue share of the top five customers in the 2023 fiscal year was only 25.4%, indicating a significant short-term increase in customer concentration. If the advertising demand from the top single customer weakens, it will have a significant impact on the performance of Big Data Group.

Furthermore, attention should be paid to the cyclical volatility of the advertising industry. Due to the high correlation between the advertising marketing industry and the macro economy, the marketing industry also exhibits a certain degree of volatility. If the macro economy weakens, companies will reduce marketing expenses, which will impact market demand. At that time, Big Data Group may be affected.

In summary, Big Data Group, which is seizing the opportunity of short videos, is still in a period of rapid development with impressive performance. However, the company still faces several potential challenges such as a significant short-term increase in customer concentration and intensified market competition. There is a possibility of significant fluctuations in its performance