\u3000\u3000 Perfect World Co.Ltd(002624) (002624)
The company released the performance forecast for 2021. It is estimated that the net profit attributable to the parent company in 2021 will be 350 million yuan – 390 million yuan, a year-on-year decrease of 77.40% – 74.81%; The net profit attributable to the parent company after deducting non recurring profits and losses was RMB 100 million-120 million, a year-on-year decrease of 90.42% – 88.50%. It is estimated that the company’s Q4 loss in 2021 is 410 million yuan – 450 million yuan, and the loss after deducting non-profit is 441 million yuan – 461 million yuan.
Key investment points:
Due to the superposition of many factors, the performance is lower than expected:
Game business: 1) in 2021, Q2 company adjusted its overseas business and shut down some overseas game projects that did not meet expectations, resulting in a one-time loss of about 270 million yuan; 2) In 2021, the flow of some old games naturally declined, and the performance of the new tour ares remains was weaker than expected; 3) Magic tower went online in mid December and has not yet entered the profit recovery period. At the initial stage of launch, the mismatch of revenue and cost led to losses at the statement level; 3) Some R & D personnel and projects with low fit with the company were streamlined, and supporting mechanisms such as salary policies were adjusted, resulting in one-time human expenditure.
Film and television business: the company signed a five-year investment and strategic cooperation agreement on 50 films with Universal Pictures in 2016. However, due to the repeated overseas epidemic, the income of some film projects was lower than expected, and the company’s net profit decreased by about 260 million yuan and included in non recurring losses.
Others: the profits of some games invested by the company and related upstream and downstream enterprises decreased in 2021, resulting in a year-on-year decrease of about 200 million yuan in the investment income of associated enterprises included in recurring profits and losses.
Some influencing factors may weaken their impact on the future. 1) The company has sold U.S. R & D studios and local distribution teams in Europe and the United States for a consideration of US $125 million. It is expected that the delivery will be completed in 2022 and the investment income will be about 380 million yuan (before tax). In the future, overseas business will be transferred to regions with more talent and policy advantages. 2) In 2021, the new tours “dream new immortal” and “magic tower” performed well. From the launch of dream new immortal to the end of 2021, the cumulative water flow of “dream new immortal” is 1.6 billion, and the annual profit contribution is expected to be 500-600 million yuan. In the first month of launch, the water flow of “magic tower” is nearly 500 million yuan, which will gradually enter the profit recovery period in 2022. 3) Only two films have not been released in the cooperation between the company and universal pictures, and the company has made a relatively stable prediction on the subsequent recovery. At the same time, most of the new startup projects of the company’s film and television dramas are platform customized dramas, so as to ensure the certainty of income and reduce risks. If the influence of Universal Pictures is deducted, the profit of the company’s film and television business in 2021 is about 70-90 million yuan. 4) The optimization of the company’s personnel continues, and it is expected to reduce the scale of hundreds to 1000 people. Although it may continue to generate some expenses caused by personnel downsizing, from a longer perspective, there is room for the company’s labor cost to decline in the future.
The game business continues to focus on “MMO +” and “card +”. The performance of “magic tower” has verified the company’s production ability on the new track. In the future, the company’s projects will be more younger and focus on the two tracks of “MMO +” and “card +”. Next, there will be products such as Tianlong Babu 2, one punch Superman: the world, million King Arthur and the world of killing immortals, which will enter the testing period and online period.
The pace of globalization continues. “Magic tower” is expected to launch an overseas version in mid-2022 and be released simultaneously worldwide. Compared with the company’s previous game products, the company’s current reserves of research projects are more suitable for global distribution in terms of themes and types. In the future, the number of overseas products independently issued by the company is expected to increase.
Profit forecast and investment rating: in 2021, the company is in the stage of transformation. The superposition of multiple factors leads to lower performance than expected. The impact of some factors on the company may be weakened in the future, and the performance is expected to return to normal growth. The company’s products will focus on youth and long-term development. The product ideas will focus on the two tracks of “MMO +” and “card +”, and the globalization process will continue to advance. It is estimated that the company’s EPS from 2021 to 2023 will be 0.21 yuan / 1.00 yuan and 1.11 yuan. According to the closing price of 13.66 yuan on January 26, the corresponding PE will be 66.37 times / 13.72 times / 12.32 times. Recently, the company’s share price has been greatly adjusted due to the impact of the performance not reaching the expectation. Corresponding to the future profit forecast, the company’s current valuation level is low and maintains the “buy” rating.
Risk warning: stricter regulatory policies; Industry competition intensifies; The online progress of game products is less than expected; The market performance of game products is less than expected; Some projects under research are suspended; Overseas expansion performance is less than expected
