Huatai Securities: Positive policy signals continue to be released, internet leaders are expected to burst with marginal improvement in growth momentum.

According to the information obtained from the Zhītōng Finance and Economics APP, HTSC has released a research report stating that positive signals related to internet policies have been continuously released recently, which is crucial for restoring investor confidence. With the gradual conclusion of this round of regulatory rectification, the bank believes that platform companies are stepping into a new stage of high-quality and sustainable development. The bank is optimistic about the continuous important role that platform companies play in key areas such as stabilizing employment and promoting development, as well as their leading role in the development of advanced technologies such as artificial intelligence.

The bank is optimistic that in a more open and supportive policy environment, internet industry leaders closely related to the real economy and production and operation activities will further unleash their vitality and show marginal improvement in growth momentum. It is recommended to pay attention to undervalued stocks with high growth potential, or leading targets with high beta attributes combined with marginal changes.

Huatai Securities' main points are as follows:

Local life and travel: Strong recovery in offline consumption scenes, continuous profit release

In 2Q23, local life and travel platforms continued their strong growth trend, mainly benefiting from: 1) Offline scenes being driven by the May Day and Dragon Boat Festival holidays last year, with online consumption in the national life service industry and catering consumption from May 1st to 3rd increasing by 133% and 92% respectively compared to the same period in 2019. The number of domestic tourists during the Dragon Boat Festival holiday has recovered to 113% of the same period in 2019; 2) The continuation of consumer convenience habits catalyzed by the epidemic, with on-demand delivery volume maintaining a growth trend, Meituan's 2Q takeaway orders increasing by 31.5% YoY, and flash purchase orders increasing by 45% YoY; 3) Abundant rider resources and continuous optimization of efficiency leading to cost reduction and release of profit elasticity.

E-commerce: Rational competition supports stable profit trend

Benefiting from the year-on-year low base and platform's active promotion of price competition to stimulate consumer demand, the year-on-year growth rate of total transaction volume (GMV) of e-commerce platforms in 2Q23 has shown some marginal improvement, which is expected to support steady revenue growth. At the same time, we have noticed that the platform's investment in price competition is not achieved through direct large-scale marketing subsidies, but through measures such as traffic subsidies and commission reduction, which to some extent ensures the platform's stable profit capability. We expect that all domestic e-commerce businesses will show positive profit growth in 2Q23, which is expected to alleviate market concerns about competition.

Social entertainment advertising: Steady growth in 2Q, intensive release of new games during the summer, advertising awaits the arrival of the post-cycle

We expect the growth rate of top game revenue to slow down in the off-season of 2Q, with new game releases mainly concentrated in the summer. Advertising industry investment is expected to show steady growth in 2Q, with a slight rebound in demand.

Risk warning: Macroeconomic and consumption recovery falling short of expectations; intensified industry competition.