New Stock Preview | East Money Marketing: Pioneering AI Marketing, Business Growth High But Profit Declining

The largest AI marketing company in China, Dongxin Marketing, has submitted its application to the Hong Kong Stock Exchange for the second time. This time, it is leveraging the AI+ technology trend and riding the wave of sector investment hotspots. Will it be able to successfully go public this time? It is understood that Dongxin Marketing recently submitted its application to the Hong Kong Stock Exchange. The company had previously submitted its IPO application in March 2021 and is now returning to the Hong Kong market after a four-year hiatus. According to Frost & Sullivan data, Dongxin Marketing is a leading AI marketing company in China, driven by AI, big models, and big data technologies. Based on revenue projections for 2023, the company is the largest AI marketing company in China, with a market share of 5%. Established in 2004, Dongxin Marketing has served over 3,700 customers in 137 vertical industries through the development, innovation, and application of full-stack AI marketing products in the digital marketing and digital commerce business scenarios. Its growth performance has been strong, with revenue increasing significantly in the first three quarters of 2023 and 2024, reaching 2.118 billion and 2.005 billion respectively, representing year-on-year growth of 38.9% and 66.4%. However, the company's profitability is relatively low and trending downwards. It reported a loss of 42 million yuan in the first three quarters of 2024, turning from profit to loss. As of November 2024, the company had cash and bank balances of 455 million yuan. In the trend of AI+ investments, Dongxin Marketing will receive high market attention. So, is its fundamental outlook worth looking forward to? Let's take a closer look. Business growth, but declining profitability Dongxin Marketing relies on AI marketing digital foundation and proprietary AI capabilities for specific industries as its underlying technological base to build a new AI marketing ecosystem. It has developed digital marketing solutions, AI marketing solutions, and digital commerce solutions, with a significant reliance on a single business. The digital marketing solutions have contributed over 90% to the company's revenue in previous years, being its core revenue source. In the first three quarters of 2023 and 2024, revenue from digital marketing solutions grew by 39.6% and 63.9% respectively, contributing 97.5% and 91.7% to the revenue growth. This business includes intelligent operations and information services, with the former contributing the most. In the first three quarters of 2024, revenue from intelligent operations accounted for 97.2% of this business. From a product perspective, Dongxin Marketing has a rich AI product matrix, including CampData Insight, CampData, Cloud XZS, CampData Insight, and Queqiao, all of which are at the forefront of the industry. For example, in 2023, the company launched China's first vertically-specific big model CampData Insight registered with the Cyberspace Administration of China. As of September 2024, Dongxin Marketing's big data database has accumulated over 217 billion marketing data, making it the largest database in the marketing industry. It is important to note that each AI product corresponds to different marketing scenarios. CampData Insight focuses on marketing content and strategy generation, CampData provides personalized data analysis to help companies build their own insights and create data-driven solutions, Queqiao enables cross-platform content management and the development of batch-marketing campaigns, while Cloud XZS is an e-commerce data aggregation platform tracking the conversion of traffic from media platforms to e-commerce platforms. The company's business relies on top short video traffic platforms, with its expenses on the top three domestic media platforms accounting for more than 90% in previous years. In the first three quarters of 2024, the expenses on the first platform accounted for 66.7%, which was established in 2012 and is one of China's largest short video platforms, most likely Douyin or TikTok. Driven by multiple AI products, Dongxin Marketing has steadily increased its customer base, serving 2,004 customers as of September 2024, an increase of 551 customers from 2022, representing a growth of 37.9%. However, the company's customer concentration is high, with the top five customers contributing 56%, 37.8%, and 57.9% of the revenue from 2022 to the first three quarters of 2024, with the largest customer accounting for 36%, 20.7%, and 18%. Additionally, the company has a high accounts receivable ratio, with trade receivables amounting to 1.44 billion yuan in the first three quarters of 2024, accounting for more than 70% of the revenue. The company's profitability is declining, with a gross margin of 14.5% in the first three quarters of 2024, a decrease of 4.6 percentage points year-on-year, compared to a 6.3 percentage point decrease from 2022. This is mainly due to a downward trend in average revenue per user, with gross revenue per user ranging from 4.921 million yuan, 4.709 million yuan, to 4.311 million yuan during this period, leading to a decline in the gross margin of the core digital marketing solutions business, which stood at 10.7% in the first three quarters, down by 5.3 percentage points year-on-year. However, there has been some optimization in expense ratios, with a combined sales and administrative expense ratio of 5.92% in the first three quarters of 2024, a 1.89 percentage point improvement year-on-year. In addition, the company increased its research and development investment by 80.9%, but the expense ratio remained stable at 10.37%. As of January 10, 2025, Dongxin Marketing holds 16 Chinese patents and patent applications in the AI and big model fields. Dongxin Marketing's profitability is not satisfactory, mainly due to a low and declining gross margin. In 2024, increased research and development investment led to losses during that period. Additionally, the high proportion of accounts receivables poses a risk, as unrecoverable amounts could significantly impact profitability. Excluding occasional client factors, if the research and development level remains constant, the company will need to improve its gross margin to enhance its profitability. The industry has potential, and if it goes public, it will attract attention From an industry perspective, digital marketing can be divided into traditional digital marketing and AI marketing services, with AI marketing rapidly emerging in recent years due to the rise of AI technology. According to Frost & Sullivan, the market size of the digital marketing industry in China in 2024 was 1.27 trillion yuan, with a compound annual growth rate of 9.7% over the past five years. The AI marketing market size was 53 billion yuan, with a compound annual growth rate of 26.6%, and a penetration rate of only 4.17%. It is projected that by 2029, the penetration rate will increase to 7.8%, with a market size of 132 billion yuan. The AI marketing market covers digital marketing service providers utilizing MarTech 2.0 and MarTech 3.0 technologies and has adopted the use of.Characteristics of AI large models based on Marketing AI Agent and Marketing Retrieval-Augmented Generation (MarRAG). From the perspective of industry participants, the competition is relatively dispersed, with the top five participants holding a market share of 14.9%, among which Dongxin Marketing holds a market share of 5%, making it the largest AI marketing company in the country.According to Frost Sullivan, Dongxin Marketing has launched the first full-stack AI marketing product matrix in China, which is somewhat scarce in the industry. Its AI products include YingSai insights, YingSai insight, YingSai data, Magpie, and Cloud Intelligence, based on its proprietary vertical AI capabilities (such as Marketing AI Agent architecture and Marketing Retrieval Enhanced Generation (MarRAG)), AI marketing wisdom pedestal (such as YingSai big model) and software developed independently by the five major intelligent centers. AI technology continues to iterate, accelerating the replacement rate of AI marketing in traditional marketing. After firmly establishing itself in the domestic market, the company is actively expanding into overseas markets, meeting specific needs in various overseas regions with its leading position in technology and products. The company has disclosed plans to develop data sets, products, and solutions suitable for overseas markets, adapting to major international media platforms and languages, as well as local application scenarios. According to the localization operation strategy, we will establish an overseas service team, recruit local talents, and establish a localized technical support center. Overall, Dongxin Marketing has a good foundation and is actively expanding its diversified businesses. Its core business is growing rapidly, but there are risks of high customer concentration and a high proportion of accounts receivable to income. The company's profitability is continuously declining, mainly due to the gross profit margin. However, as a leader in the industry, driven by the high growth of AI marketing industry, it is expected to gain a higher market share and bargaining power through scale growth and improve profitability. Currently, the main traffic carriers are head short video platforms, including Douyin, Kwai, and Xiaohongshu. Recently, due to the impending TikTok ban, a large number of "TikTok refugees" have flocked to Xiaohongshu, bringing a surge of traffic to Xiaohongshu, which has also driven the frenzy of the data/AI marketing sector. Several related A-share stocks have shown three consecutive daily limit up. The fluctuation of TikTok in the US has also brought opportunities to Kwai, and Dongxin Marketing's main marketing platform is short video platforms. Its upcoming listing is expected to attract the attention of short-term funds.