Wondershare Technology Group_ Doubao Video AI Model Makes Competitor Stronger

Summary of Key Points from the Conference Call Company Overview - Company: Wondershare Technology Group (Ticker: 300624.SZ) - Current Stock Rating: Underweight [3] - Market Capitalization: Rmb7,921.6 million [3] - Current Share Price: Rmb41.09 (as of September 24, 2024) [3] - 52-Week Range: Rmb88.70 - Rmb37.92 [3] Financial Performance - Fiscal Year Ending: December 2023, with projections for 2024 to 2026 [3] - Revenue Projections: - 2023: Rmb1,480.9 million - 2024: Rmb1,483.0 million - 2025: Rmb1,579.8 million - 2026: Rmb1,726.3 million [3] - Earnings Per Share (EPS): - 2023: Rmb0.5 - 2024: Rmb0.1 - 2025: Rmb0.3 - 2026: Rmb0.6 [3] - EBITDA: - 2023: Rmb158.0 million - 2024: Rmb81.0 million - 2025: Rmb139.7 million - 2026: Rmb194.6 million [3] Industry Context - Industry: Greater China IT Services and Software - Industry View: Cautious [3] - Competitors: CapCut (ByteDance), Kingsoft Office Software Inc, Glodon Co. Ltd., among others [7] Competitive Landscape - Impact of Competitors: The launch of Doubao Video AI Model by Volcano Engine (ByteDance) is expected to enhance CapCut's competitive edge, posing a significant threat to Wondershare [2] - Market Position: Wondershare is facing increasing competitive pressure from CapCut, leading to a reiteration of an Underweight rating [2] Valuation and Risks - Valuation Methodology: 10-year DCF with a WACC of 10.0% and terminal growth of 3% [5] - Risks to Upside: - Faster increase in paying user ratios due to AI adoption - Successful transition to brand ads reducing sales and marketing ratio [5] - Risks to Downside: - Slower-than-expected growth in paying users - High costs associated with large language models (LLMs) impacting margins - Increased competition from AI-native applications [6] Price Target - Price Target: Rmb35.00, indicating a downside of 15% from the current price [3] Analyst Insights - Analyst Contact: Yang Liu, Lydia Lin, Tom Tang [4] - Research Disclaimer: Morgan Stanley may have conflicts of interest due to business relationships with companies covered in the research [3][12] Additional Notes - Stock Ratings Distribution: As of August 31, 2024, 38% Overweight, 47% Equal-weight, 15% Underweight [8] - Historical Price Target Changes: Price target reduced from Rmb82.95 in January 2024 to Rmb35.00 in August 2024 [11] This summary encapsulates the critical insights and data points from the conference call, providing a comprehensive overview of Wondershare Technology Group's current standing and outlook within the Greater China IT Services and Software industry.