Goldman Sachs lowers WEIMOB INC's target price to 2.25 yuan, short-term uncertainty still exists

Goldman Sachs published a report predicting that the mainland cloud business and marketing solutions provider Weimob Group (02013.HK) will resume year-on-year revenue growth in the second half of 2025 due to a low base effect. The bank forecasts that Weimob's total revenue in the second half of 2025 will grow by 74% year-on-year and by 6% half-on-half, reaching RMB 822 million. Regarding subscription solutions, the bank expects that the weak macro environment and the reduction of low-profit subscription business starting in 2024 will continue to pressure revenue, but this will be partially offset by growing AI revenue (estimated at RMB 40 million in the second half of 2025, accounting for 9% of subscription revenue). For merchant solutions, the bank anticipates that Weimob's revenue in the second half of 2025 will grow 8 times year-on-year or by 6% half-on-half, with total transaction volume remaining stable but monetization rates recovering. The bank expects total advertising transaction volume to decline by 1% year-on-year in 2025, followed by acceleration to year-on-year increases of 8% and 13% in 2026 and 2027, respectively, as higher contributions from Douyin (expected to account for 18% of total transaction volume by 2028, up from 7% in 2025) partially offset the impact of slowing transaction volume growth on the WeChat platform.

Goldman Sachs essentially maintains its revenue expectations for Weimob in 2025 but lowers its revenue forecasts for 2026 and 2027 by 4% and 5%, respectively, mainly based on downward adjustments to subscription and merchant solutions revenue, considering the impact of macro weakness and slowing growth in WeChat advertising transaction volume. The bank has also lowered the adjusted net profit margins for 2025 to 2027 by 0.7, 2.1, and 1.6 percentage points to 3.3%, 8.2%, and 11.7%, respectively, as it accounts for incremental operating expenses related to Douyin channel development. The bank also considered the impact of equity dilution resulting from issuing shares to Wujing Capital.

Goldman Sachs has lowered Weimob's 12-month target price from the previous HKD 2.6 to HKD 2.25; maintaining a "Neutral" rating, implying a 24% upside potential. The bank believes that subscription solutions revenue still faces pressure, there is uncertainty in merchant solutions, and it awaits more clarity regarding the growth of Douyin advertising transaction volume