Hello (MOMO)2024-12-11 01:35Investment Rating - The report maintains a Neutral rating for Momo Inc (MOMO US) with a target price of $7.40, representing a potential upside of 0.1% from the current price of $7.39 [1][4] Core Views - Momo's core business and Tantan are expected to remain under pressure due to ongoing business adjustments and weak social consumption trends [1] - Overseas business is growing rapidly, partially offsetting the decline in core business, with total revenue expected to decrease by 5% YoY in 2025 [1] - The company's market capitalization of $1.3 billion is below its net cash position of $1.4 billion as of Q3 2024, and its shareholder returns are leading among internet companies, with quarterly buybacks of $30-60 million and a dividend yield exceeding 7% [1] Financial Performance Q3 2024 Results - Revenue declined 12% YoY to RMB 2.68 billion, slightly better than expected, with adjusted net profit of RMB 490 million, down 19% YoY but above expectations [2] - Adjusted net margin was 18%, down 2 percentage points YoY, mainly due to increased operating expenses from higher overseas app revenue share and overall revenue decline [2] - Momo's live streaming and value-added services revenue declined 14% and 18% YoY respectively, while new app revenue grew 41% YoY, driven by overseas social product growth [2] - Tantan's revenue fell 28% YoY, with MAU and quarterly paying members declining by 900k and 100k respectively [2] Financial Forecasts - Revenue is expected to decline 12% YoY in Q4 2024, with the decline narrowing in 2025 as ecosystem adjustments conclude [2] - 2025 net profit forecast is revised down by 11% due to changes in revenue structure and ongoing new business investments [2] - For 2024E, revenue is forecast at RMB 10.526 billion, with adjusted net profit of RMB 1.3 billion, representing a net margin of 12.3% [3] - 2025E revenue is projected at RMB 10.015 billion, with adjusted net profit of RMB 1.308 billion and a net margin of 13.1% [3] Business Segments - Momo's revenue is expected to decline 3% YoY in Q4 2024, while Tantan's revenue is forecast to drop 26% YoY [16] - New independent social apps accounted for 16% of total revenue in Q3 2024, up from 2% in Q1 2021 [12] - Momo's live streaming revenue declined 45% YoY in Q3 2024, while value-added services revenue fell 19% YoY [14] Valuation and Shareholder Returns - The target price is based on 7x 2025E P/E ratio, raised from $5.90 to $7.40 [1] - The company's shareholder return policy is leading among internet peers, with quarterly buybacks of $30-60 million and a dividend yield exceeding 7% [1]