\u3000\u3000 Hubei Century Network Technology Inc(300494) (300494)
Key investment points
Event: the company issued a performance forecast for] 2021. It is estimated that the annual net profit attributable to the parent company will be 125-155 million yuan, an increase of 106.7% – 156.3% year-on-year compared with 60.47 million yuan in the same period in 2020; It is estimated that the net profit deducted from non parent company is 120-150 million yuan, with a year-on-year increase of 195.7% – 269.6%. Overall, the company’s annual performance in 2021 is in line with expectations.
The operation system of “platform + content + service” has been deepened, and the value of acquiring Tianxi mutual entertainment has been realized. During the reporting period, the product matrix of the company’s IP operation expanded steadily, and the complete ecosystem of “IP + platform + distribution + live broadcast + e-commerce” based on suileyou cloud game platform has been preliminarily formed; Under the background of the improvement of the epidemic situation, the Internet marketing business has gradually stabilized and basically stabilized. In January 2021, the company invested 360 million yuan to acquire the remaining 30% equity of Tianxi mutual entertainment, completed the wholly-owned acquisition of Tianxi mutual entertainment, and successfully realized the extensive development of the game industry chain. During the reporting period, the market performance of the subsidiary Tianxi mutual entertainment IP game products was outstanding, and the profit increased significantly compared with 2020. Through the acquisition of Tianxi mutual entertainment, the company owns high-quality Japanese IP such as “Sanguozhi 11”, “true sanguowushuang 6”, “true sanguowushuang 8”, and participates in the supervision and production of various mobile games such as “Sanguozhi 2017”, “Sanguozhi · strategic edition”; Among them, “Three Kingdoms · strategic edition” is the most important IP supervision project of the company. 21q1 ranked fifth in the global mobile game revenue list. At present, taptap score is 6.4 and station B game score is 7.4, ranking the top 20 of Appstore strategy games, with good long-term operation potential. We believe that the company organically combines the existing business of Tianxi mutual entertainment with the overall planning of the parent company, so as to continuously improve the overall competitiveness of Tianxi on the one hand; On the other hand, it also promotes the business expansion of the parent company, enriches the company’s business matrix, and is expected to form a stable growth force of the whole industrial chain of “IP authorization + game research and operation”.
RMB 486 million will be added to the ground to help comprehensively deepen and speed up the cloud game platform. Previously, the fixed increase was jointly participated by 15 investors with diverse backgrounds such as Wuhan Optics Valley New Technology Industry Investment Co., Ltd., CAITONG fund and ubsag. The raised funds will be mainly used for cloud platform construction, IP introduction, game service project construction, big data and cloud storage platform upgrading. The company itself has many years of experience and technology accumulation in game platform operation and cloud computing. The implementation of this fixed increase may accelerate the construction of a new cloud game community ecology.
Profit forecast and investment suggestions. According to the performance forecast of the company in 2021, the net profit attributable to the parent company from 2021 to 2023 is expected to be 150 million yuan, 230 million yuan and 335 million yuan, corresponding to 30 times, 19 times and 13 times of PE respectively. The company serves as a leading enterprise of internet entertainment platform. With the improvement of the epidemic situation, the business of online entertainment platform is basically stable; The company has wholly acquired Tianxi mutual entertainment. In the construction of a new generation of cloud game platform, it continues to be optimistic about the company’s future IP and game operation development; The implementation of fixed increase helps deepen the construction of cloud game service platform, is optimistic about the growth potential of the company’s cloud games, and maintains the “buy” investment rating of the company.
Risk tip: the risk of changes in industrial policies, the risk of intensified market competition, the upgrade progress of cloud game platform may be less than expected, and the performance of Tianxi mutual entertainment may be less than expected.
