This year is undoubtedly a big year for sports, with a series of exciting events such as the European Championship and the Olympic Games taking turns. Especially at the Paris Olympics, the competition between China and the United States was fierce, and they tied for the top spot on the gold medal table. In this sports feast, many athletes such as Zheng Qinwen and Pan Zhanle performed exceptionally well, shining brightly, once again setting off a sports boom in the country and deeply feeling the infinite potential and vitality of the sports industry.

As a leading domestic digital sports and entertainment operator and Internet sports industry leader, Crazy Sports (0082.HK) continues to lead the industry development trend with its steady business strategy and rapid market response capabilities. According to the company's mid-term performance for 2024 released on August 29, the company achieved a revenue of approximately 0.208 billion Hong Kong dollars in the first half of the year, while the loss narrowed significantly by more than 40% to 5.7 million Hong Kong dollars, showing a clear recovery in profitability and the prospect of steady recovery and growth.

1. Actively transforming to drive steady growth of core business and increase gross margin.

Focus on the core business. The company's profitability rebounded in the first half of the year, mainly due to adjustments in business models and product structure. Facing the challenges brought by new consumer preferences, the company is taking steady steps to continuously develop the digital sports and entertainment business with "Crazy Single + New Retail of Sports Lottery" as the main line, on the one hand, focusing on product innovation and operation promotion, maintaining the continuous growth of Crazy Sports' knowledge payment business, and cultivating new business growth points.

According to the financial report, in the first half of the year, one of the company's core sources of income, the sports knowledge payment platform, achieved a revenue of approximately 0.125 billion Hong Kong dollars, an increase of 8.9% year-on-year, showing the growth momentum of this business segment. From the perspective of core operating indicators, in the first half of the year, the average monthly active users of Crazy Singles increased by 4.0%, especially during the 2024 European Championship, compared with the same period in 2023, the number of active users increased significantly by 89.0%, demonstrating the company's strong user attraction during major sports events. In addition, the total number of users on the company's platform also achieved significant growth in the first half of the year, rising by 10.1% compared to the end of 2023, reaching 96.06 million.

From the above data, it can be seen that the strong performance of the company's sports knowledge payment platform business, including revenue growth, improved user activity, and significant increase in the total number of users. Especially during major sports events, the company has demonstrated outstanding user attraction, laying a solid foundation for its future business development.

In the first half of the year, the strategic focus of Crazy Singles APP was on expanding new media sales channels and deepening the potential of the sports knowledge payment market on short video platforms, successfully opening up new growth points for sports knowledge payment. Looking ahead, Crazy Singles plans to increase investment and continuously innovate and expand this market.

In terms of product innovation, during the 2024 European Championship, Crazy Singles fully utilized the advantages of AIAgent technology and large language models, combined with years of accumulated event data, user behavior data, and expert analysis results, and launched the domestic first large-scale AI assistant in the vertical field of "sports + lottery" called "Ruyi", providing personalized services to users, successfully seizing the first-mover advantage in the field of sports knowledge payment and increasing the willingness and spending of private domain users.

In the first half of the year, the company continuously optimized the business model and strategy of sports and leisure games, focusing on using the company's existing IP rights to release sports games, while reducing investment in other games with lower ROI. In the sports and leisure gaming business, the company achieved approximately 76.7 million Hong Kong dollars in revenue in the first half of the year.

For the sports lottery retail service, in the first half of the year, the company deepened its cooperation with the national and provincial sports lottery management centers, actively exploring a diversified cooperation model of 'sports lottery +' to expand the scope of new retail lottery services and reach new customer groups. During this period, the company added 6 commercial complex stores in Hebei, Anhui, Shaanxi and other places.

Overall, the company's gross margin in the first half of the year increased from 34.6% in the same period of 2023 to 38.7%, demonstrating substantial progress in cost control and high-gross-margin businesses.

Second, looking at the company's future growth potential from multiple dimensions.

From a medium- to long-term perspective, the business layout established by Crazy Sports has already positioned itself in various industry spaces with huge growth potential in the future.

First, it focuses on digital sports entertainment business, dedicated to building a comprehensive entertainment ecosystem for sports culture enthusiasts. The company is driven by big data and AI technology, relying on a large user and event database, and continues to consolidate its position as a digital sports entertainment operator with the core line of business focusing on 'crazy red envelope + new retail of sports lottery'.

We are already in the era of the digital economy, and sports enthusiasts are faced with an overload of information. The company's introduction of the first domestic sports + lottery AI assistant, 'Ruyi', can provide users with more accurate and objective event forecasts and data analysis services, as a new exploration. With the empowerment of AI technology based on over 20 years of data accumulation, it will have more advantages.

From the perspective of industry space and policy, the company will continue to invest in AI technology, further integrating online and offline businesses, building a more complete AI ecosystem, enhancing operational efficiency, and also meeting the increasingly diverse needs of users. This will further strengthen the brand's international influence and market competitiveness, laying a solid foundation for the company's long-term development and internationalization strategy.

According to data, during the '14th Five-Year Plan' period, the total target scale of the sports industry in China is 5 trillion yuan, and the added value is expected to account for 2% of the GDP. Sports has become a hallmark industry for the great rejuvenation of the Chinese nation. By 2025, the total scale of the sports competition and performance industry will reach 2 trillion yuan, and 100 major well-known sports events will be launched. This will undoubtedly bring significant economic effects and industry opportunities.

In the first half of the year, Crazy Sports fully utilized its unique 'digital + sports' and 'sports + entertainment' resources to meticulously plan and successfully execute significant sports IP events. This greatly improved the brand's visibility and influence, further expanding the company's user base and market share.

During the Dragon Boat Festival this year, the company vigorously built the WBC professional boxing championship in Foshan, China. With its exciting event content and high-level player competitions, the competition attracted over 0.3 billion online viewers, dominating the hot searches on Douyin's platform for two consecutive days, showcasing the company's strong capabilities and innovative abilities in sports event operations.

From a macro perspective, the successful hosting of the WBC professional boxing championship during this time effectively promoted the economic development of tourism in Foshan. This further enhances the local cultural visibility and sense of identity, aligning closely with the current national policy direction, providing a valuable practical example and solid support for promoting the in-depth integration and development of 'sports + culture + tourism'.

A recent report from the global well-known research institution QYResearch shows that the global sports marketing agency market is expected to reach 16.565 billion US dollars by 2030, with a compound growth rate of 9.1% from 2024 to 2030.

The company has gradually accumulated advantages in IP events, and the ability to develop original local events in the future, leading to a pyramid-style event system from the local level to national and international professional events. Furthermore, if the business gradually expands to the sports marketing market, it will be a huge market opportunity.

In addition, the company is actively laying out and expanding value-added businesses related to digital sports and entertainment, aiming to provide users with a more diverse and rich sports entertainment experience, and is expected to attract more sports users with lottery players as the core.

From a global perspective, despite fluctuations, the lottery industry is generally showing a stable growth trend. According to brokerage statistics, taking the United States as an example, from 1982 to 2020, lottery sales increased from 0.169 billion US dollars to 2.69 billion US dollars, achieving a significant compound annual growth rate (CAGR) of 7.6% in 38 years. This growth rate is higher than the 5% GDP growth rate during the same period, fully demonstrating the steady growth potential of the lottery industry.

Similarly, in Japan, during the early stages of the economic recession in the 1990s, although the increase in unemployment led to a temporary increase in lottery sales growth and subsequent decline, it has since maintained a stable sales trend.

With its deep accumulation in AI technology, and through the effective implementation of the "AI+" strategy, the company is expected to inject new vitality into the development of its own sports lottery new retail business. In the long run, with the power of AI technology, the company can analyze user needs more accurately, optimize product design, and effectively promote the development of its main business of crazy sports + sports lottery new retail, further consolidating its leading position in the digital sports and entertainment field.