On March 31st, Joy Spreader Group (6988.HK) released its 2022 annual performance report, which showed a significant increase in overall revenue of 166.8%, reaching HKD 3.72 billion, the largest annual growth since its listing. The company achieved a gross profit of HKD 440 million, maintaining relative stability year-on-year.

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Overseas E-commerce: Explosive Revenue Growth of 20 Times, Continuous Improvement of Supply Chain and Algorithm Models

In 2022, Joy Spreader Group"s overseas e-commerce business achieved revenue of HKD 3.1 billion, a year-on-year increase of 2000%, accounting for a substantial increase in the company"s total revenue from 10.6% in 2021 to 83.4%. The company achieved a gross profit of HKD 190 million, with a stable gross profit margin. This has fundamentally changed the company"s revenue structure, and the scale and high growth of its overseas e-commerce business have profoundly reshaped the company"s investment value.

1.Continuous Improvement of the Supply Chain System

In 2022, Joy Spreader Group"s overseas e-commerce platform MARTOP sold 2.793 million products, a year-on-year increase of 2001%. In terms of upstream suppliers, Joy Spreader Group"s cooperation with new suppliers such as OPPO and vivo is also about to enter the landing stage, providing more supply of product categories. In terms of warehousing, Joy Spreader Group has built its warehouse in Hong Kong, with sufficient foreign exchange reserves to ensure stable and reliable supply.

2.Dimensionality Reduction through Advantages of Algorithm Models

In 2022, the company"s overseas e-commerce product sales department"s R&D expenses reached HKD 29.65 million, accounting for 56.2% of the total R&D expenses, mainly used for overseas market promotion data procurement and data model establishment. These data models are expected to play an important role in market promotion of overseas e-commerce product sales.

3.Expanding Market Size

In response for the underdeveloped supply chain in Southeast Asia, Joy Spreader Group has continuously deepened its market presence in Southeast Asia by collaborating with upstream suppliers and downstream distributors. Especially for Chinese electronic consumer goods, which have a more significant "effects of generation gap" compared to Southeast Asian electronic consumer goods, Joy Spreader Group has a clear advantage in terms of production capacity, quality, etc. This is extremely beneficial for Joy Spreader Group to rapidly capture the market and expand its market size amid the process of popularizing 4G and 5G in Southeast Asia and the consumption upgrade process under the backdrop of GDP growth in Southeast Asia.

Entertainment technology: Substantial progress in cooperation with state-owned enterprises, multiple new businesses fully launched

In 2022, Joy Spreader Group"s cooperation with state-owned cultural enterprises Poly Culture Group and Poly Film entered a substantive stage. Leveraging the mixed-ownership reform of Poly Digi-Entertainment, Joy Spreader Group successfully launched multiple businesses in various fields such as Web3.0, AIGC, film and television production, MCN, and 1P traffic cultivation.

1.Web3.0 realizes vertical scene applications, and the digital asset platform is successfully launched

On November 1, 2022, Poly Digi-Entertainment launched the film and television digital asset service platform "Kong Jian," marking the entry into the Web3.0 era. Joy Spreader Group, as the exclusive middleware service provider for "Kong Jian," leverages its outstanding advantages in big data and interest algorithms to provide technical support for the market-oriented operation of digital assets.

2.Leveraging the background resources of state-owned cultural enterprises to create the first state-owned enterprise MCN

Poly Digi-Entertainment actively develops state-owned enterprise clients, undertakes national key film and television projects, and establishes the country"s first state-owned enterprise MCN with leading short video content and influencers that conform to the national ideological direction. Joy Spreader Group became the exclusive supporting company for this MCN organization.

3.Expanding into film and television production, forming a 1P trafficcluster

In 2022, Poly Digi-Entertainment invested in national key film and television works such as“The Tipping Point” “To Our Dreamland of Ice” and “Ping Pong” ，and signed contracts with well-known artists with positive energy. These related businesses will enrich Joy Spreader Group"s proprietary IP and form Joy Spreader Group"s 1P traffic cluster, reducing the company"s costs for external traffic acquisition.

4.Exploring AIGC applications in multiple dimensions, fully covering key areas of sight, sound, and graphics

The commercialization of AIGC services is the goal of Joy Spreader Group"s development of new cultural businesses. The company first attempted dialogue-based language model technology, accessed large AI platforms such as GPT and Baidu RNIE Bot , and developed AIGC application-side businesses, including the digital human field of visual interaction, the speech service field of auditory interaction, and the design service field of graphic output.

Algorithmic Marketing: Structural Optimization and Technological Advancements Maintain Strong Gross Profit Margin Amid Industry Headwinds

Algorithm-Based Marketing Business is Joy Spreader Group"s earliest and primary business, providing core big data algorithmic technology support for the group"s various new businesses.

In 2022, Joy Spreader Group responded to the impact of the pandemic and tightened regulatory approval of new-game license by actively adjusting its business strategy, achieving revenue of HKD 620 million, of which the revenue from entertainment and digital product marketing was HKD 310 million, and short video e-commerce marketing revenue was HKD 310 million, an increase of 6.5% compared to 2021.

In 2022, the gross profit margin of entertainment marketing was 31%, up 1 percentage point year-on-year, and the gross profit margin of short video e-commerce marketing remained relatively stable at 49%. The average revenue per paid action of Algorithm-Based Marketing Business was HKD 2.4, an increase of 10.8% year-on-year. The robust gross profit margin and significant increase in revenue per billing action reflect enhanced market competitiveness and profitability.

Future Strategy: Embrace State-Owned Enterprises, Expand Overseas, and Fully Expand Business Opportunities

In 2023, as the impact of the pandemic gradually subsides, the macroeconomic environment in China is gradually recovering, and the digital economy centered on big data continues to receive policy support and attention. Joy Spreader Group will focus on its core business of Algorithm-Based Marketing Business and work with central state-owned enterprise to promote business innovation. It will also increase its investment in overseas e-commerce businesses, striving to achieve better business performance.

1.Domestic Market: Embrace State-Owned Enterprises and Expand into New Business Areas and Markets

We will use mainstream PGC stars and content, as well as MCN influencers and content, to cultivate 1P traffic. We will also increase our investment in the application side of AIGC and try to use AIGC to assist content creation (including code scripts, novel writing, script storyboard, etc.), industrial design services, creative design services, smart city construction, and digital scene applications for cultural and tourism industries. This will enable our culture and entertainment technology business to enjoy the benefits of the digital age.

2.Overseas Market: Seize the Market, Improve the Technical Model and Supply Chain Service System

In 2023 and beyond, we will focus on the characteristics of overseas e-commerce product sales and market environment, with MARTOP, an independent e-commerce platform, as the core, to improve the technical, traffic, and supply chain service systems. We will focus on electronic consumer products, expand product categories, increase physical subsidies, expand sales networks, and increase revenue.

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