HAITONG INT'L: WB-SW (09898) received a "outperform the market" rating, its unique position in social media platforms remains unchanged.

HAITONG INT'L released a research report, covering for the first time, giving WB-SW (09898) a "outperform market" rating and a target price of HK $107 per share. The main consideration is that Weibo's user base and platform have stabilized, entering a stage of steady development with growth stabilizing, positioning it at a low level compared to other comparable internet companies. Key points from HAITONG INT'L: Company Background Weibo is a leading social media platform in China, with a unique position in the social media platform market (large user base, abundant social relationship resources, real-time, viral information dissemination mode, rich marketing resources, and celebrity effects). The combination of high marketing efficiency and high-quality content makes it an indispensable advertising channel for businesses. In addition, the utilization of generative AI technology in content creation, precise targeting, and hot topic discovery on Weibo will further improve platform monetization efficiency in the future. Mixed 3Q25 Performance Total revenue was $440 million (down 5% year-on-year and 1% quarter-on-quarter), in line with Bloomberg's expectations after being adjusted in late October. Online advertising revenue decreased by 6% in USD and 5% in RMB year-on-year; value-added service revenue increased by 2% to $669 million. Adjusted net profit was $110 million, exceeding expectations by 3%, with an adjusted net profit margin 1% higher than Bloomberg's expectations; adjusted operating profit margin decreased by 6% quarter-on-quarter and year-on-year to 30%. Mild Recovery in Q4 Advertising, low revenue visibility for 2026, but the uniqueness of its marketing remains unchanged In the third quarter, the e-commerce and automotive sectors showed resilience, while the gaming and 3C sectors saw a decline in spending year-on-year. The fourth quarter is expected to benefit from "Double Eleven" and intensified competition on e-commerce platforms, providing some support from e-commerce advertising. However, the recovery of categories such as gaming, mobile phones, celebrity endorsements, and beauty products is still under observation. Despite positive factors such as the Winter Olympics, World Cup, and ongoing competition among e-commerce platforms next year, the phasing out of automobile national subsidies may hinder growth. The bank predicts Q4 advertising revenue of $440 million (a 3% decrease year-on-year) and a full-year revenue of $1.72 billion in 2026 (a 2% decrease year-on-year). Continued solidification of community engagement during the monetization downturn The company has improved interaction through algorithm optimization, resulting in double-digit growth in average viewing time, duration, and retention of low-frequency users during the summer. The number of users participating in and releasing "Super Topics" in the third quarter saw double-digit growth year-on-year. In addition, Weibo Smart Search has a monthly active user base of over 70 million, with DAU and search volume increasing by over 50% quarter-over-quarter, demonstrating high user recognition of Weibo Smart Search. Management is confident in achieving annual targets and maintaining annual shareholder returns The fourth quarter is typically the lowest season in terms of Weibo's profitability, with higher marketing expenses and concentrated investments in Double Eleven and celebrity endorsements. However, by controlling costs and improving efficiency, the bank believes that the company can maintain its target of approximately 30% adjusted operating profit margin for the full year. From 2020 to 2025, Weibo aims to distribute approximately $200 million in dividends annually, representing 58% and 64% of net profits in 2023 and 2024, respectively. In the future, the company will continue to adhere to annual dividends. Risk Factors Intensified competition, macroeconomic weakness.