In the past few months, the company has consistently exceeded our expectations regarding the monetization of 'Unsolved.' Apart from the impressive revenue growth, the most surprising factor for us has been the shift in the trajectory of marketing expenditures. Through further improvement in KPIs of this application, despite seasonally unfavorable market conditions (high CPI), the company continues to increase user acquisition investments simultaneously maintaining consistent expected returns.
Keeping the above in mind, we anticipate that when user acquisition costs begin to decline (likely around end of the 3rd or beginning of the 4th quarter), the potential of the implemented changes in the application should be further unlocked, resulting in its continued dynamic progression of results. Additionally, we would like to point out that the most significant changes regarding 'Unsolved' are still ahead of us. As we indicated in our previous recommendation, the new metagra should prove to be the element that will contribute the most to the improvement of the application's KPIs. We expect to see the initial effects of these changes around 2H'24. The production of the studio's second most important project (a new RPG game) is proceeding according to schedule.
A technical soft launch of the game was conducted during 2Q'23, which received positive reviews from testers. We anticipate that this project will make its market debut in 2024. Despite the recent dynamic increase in the stock price, our estimated results for the 2023-24 period imply an attractive multiple valuation for the company (adjusted P/E at the level of 8-10x). Furthermore, the decrease in the risk-free rate also has a positive impact on the valuation. With this in mind, we maintain our BUY recommendation for Artifex Mundi, while simultaneously raising the target price to 22,8 PLN per share, which is 30% above the current market price.
