\u3000\u3000 Shanghai Yaoji Technology Co.Ltd(002605) (002605)
The short-term performance is under pressure, and the long-term fundamentals are optimistic, showing a steady and positive trend. The company expects the net profit attributable to the parent company to be 540-604 million yuan in 2021, a year-on-year decrease of 51% – 45%; The net profit deducted from non parent company was 495-549 million yuan, a year-on-year decrease of 13% – 3%. The reasons for profit fluctuation include: the rise of raw material prices of playing cards and the increase of procurement costs; Increased investment in R & D of games, and the R & D expenses of q1-q3 increased by 66% year-on-year in 2021; The change of equity accounting method of Shanghai cell therapy group resulted in large non recurring profits and losses. However, we believe that the company’s long-term basic market is still relatively stable. In addition, the company invests in star card company Shanghai Chaowang. Considering the company’s experience in investment transformation for many times, we are optimistic about its layout in the track.
The star card industry is driven by demand, and the Chinese market is in a blue ocean. Star card has both collection value and investment value. Its characteristics require the supply to maintain a relatively stable state, and the demand determines the market ceiling. The upsurge of star card since 2019 has benefited from the drastic changes on the demand side. While the Chinese star card is still in its early stage, we believe that its growth space can be seen from three dimensions in the long term: (1) macro view sports consumption market growth has high certainty and large space. Compared with developed countries, China’s per capita sports consumption is relatively low, and compared with the United States, the proportion of China’s sports consumption in the sports industry still has great room for improvement. We believe that policy support will be a major driving force for its growth. (2) Compared with foreign countries, we expect the total space of the primary and secondary market of Chinese star cards to be about 3.6-4.7 billion yuan. Referring to the proportion of North American star card sales in the scale of sports event market in 2020, and based on the scale of China’s sports event market in 2018 and the proportion of overseas star card primary and secondary market, we expect the total space of China’s star card primary and secondary market to be about 3.6-4.7 billion yuan. In 2020, the resale market scale of China’s star card was only about 300-400 million yuan, so we believe that China’s star card market still has great growth space. Although the IP value of ball sports in China is lower than that in the United States, the base of Chinese fans is much larger than that in the United States, and the proportion of star card players in fans is low. We believe that the number of card fans will be the main growth point of the industry. (3) In horizontal comparison, there is also a large gap between the market scale of China’s star card and the market scale of similar categories such as tide play. China’s industrial chain is not yet mature, and players in all links have great room for improvement in business optimization and income scale.
Closed loop mode, original ecological empowerment, and star card may become the next growth point. Based on the Daka culture and card Amoy platform of Shanghai Chaowang, the company’s star card business is expected to achieve ecological closed loop: Daka culture is the IP issuer of China’s head card, and the card Amoy platform is the trading platform of China’s head second-hand collection card. Gmv exceeded 600 million yuan in 2021. The company will empower the production link and customer acquisition of star card business through its original business, and conduct in-depth development in combination with blockchain. We believe that the collection value of star cards is highly consistent with the right confirmation function of blockchain. Overseas nbatopshot has made brilliant achievements. We are optimistic about the company’s continuous development in this business.
Profit forecast and investment suggestion: due to the rising price of raw materials and the lower profit margin of Xinyou purchase, we will reduce the revenue from RMB 4.996, 5.970 and 6.932 billion to RMB 4.056, 5.292 and 6.394 billion in 2021-2023, and the EPS from RMB 2.08, 2.46 and 2.81 to RMB 1.39, 1.73 and 2.08 in 2021-2023, corresponding to 16 / 13 / 11 times of PE respectively. We believe that with the adjustment of raw material costs, the return of Xinyou and the long-term growth of innovative marketing business, the company’s performance is expected to grow steadily. We give a target price of 37.31 yuan in 2022 to maintain the company’s “buy” rating.
Risk warning: policy supervision risk, goodwill impairment risk, new business development is less than expected
