\u3000\u3000 Wuhu 37 Interactive Entertainment Network Technology Group Co.Ltd(002555) (002555)
Event: on February 22, the company released the performance forecast for 2021: the net profit attributable to the parent company in 2021 was 2.8 billion yuan – 2.85 billion yuan, a year-on-year increase of 1.41% – 3.23%; The net profit attributable to the parent company was RMB 2.6 billion to RMB 2.6 billion, a year-on-year increase of RMB 2.6 billion to RMB 2.6 billion; EPS is 1.28 yuan / share – 1.30 yuan / share.
The overall performance exceeded previous expectations and continued to hit a record high in a single quarter. In 2021, the net profit attributable to the parent company of Q1, Q2, Q3 and Q4 was 117 million yuan, 737 million yuan, 867 million yuan and 1.079-1.129 billion yuan respectively, with year-on-year growth rates of – 83.98%, – 24.10%, 54.77% and 115.49% – 125.47% respectively, of which Q3 and Q4 continued to hit record highs in the same quarter. According to sensortower, since the second half of 2021, the company has ranked the top 5 in the global revenue ranking of Chinese mobile game publishers, compared with 6-10 before.
“Self research + going to sea” has achieved results one by one, driving the gradual release of performance. We believe that there are two main reasons for the gradual recovery of the company’s performance in the third and fourth quarters: 1) self-developed products have achieved results one by one. In the third quarter, “Douluo mainland: duel between soul masters” achieved a monthly flow of more than 700 million yuan after it was launched, and so far it has remained at the top 20 of the IOS popular game revenue list. At the same time, as a next-generation engine work, the product also accumulates experience for the follow-up high-quality R & D. 2) A long-term breakthrough has been made in going to sea, and the income contribution has gradually increased. For example, the original “three elimination + SLG” play “doomsday hustle and bustle” has steadily increased since its launch in August 2020, ranking ninth in China’s mobile game revenue list in 2021, and is expected to contribute more than 2 billion yuan in the whole year; ARPG themed song of Cloud City successfully opened the Korean market through fine localized operation and marketing, and ranked 9th in the Korean market in 2021q3 and 4th in the revenue of mobile travel to sea; In addition, the simulated operation of “call me big shopkeeper” and “Jiangshan beauty” also performed stably. “Call me big shopkeeper” ranked 18th in the income of South Korean mobile tourism in 2021q3, and “Jiangshan beauty” ranked top 30 in the income list of Chinese mobile tourism. We believe that the company’s self-developed and key overseas products are gradually entering the profit recovery period, and are expected to continue to contribute to the performance in 2022.
Looking forward to the future, there are abundant product reserves, and overseas is expected to become an important source of growth. At present, the company has more than 40 products at home and abroad, of which self-research accounts for more than 40%. The long-term categories other than MMO account for 60%. Several products such as the light of the past, the city of power, the dawn plan, the last primitive man and the fortress of the air: set sail have obtained the version numbers. Under the guidance of policy encouragement to go to sea, the company will increase its efforts to go to sea. Code magic and code s for Europe and the United States are under research and testing; The self-developed Three Kingdoms Theme SLG and code C6 cards have been tested online and are expected to be online this year, which also provides guarantee for overseas income.
Investment suggestion and profit forecast: the company’s “self research + going to sea” “The transformation has gradually made breakthroughs, and the overseas business will continue to make efforts in the future to help the gradual release of future performance. Considering that the company’s performance forecast exceeds the previous expectations, we raise our performance forecast for the company. It is estimated that the company’s revenue in 2021 / 2022 / 2023 will be 18.720 billion yuan / 22.464 billion yuan / 26.956 billion yuan, the net profit attributable to the parent company will be 2.812 billion yuan / 3.368 billion yuan / 4.116 billion yuan, and EPS will be 128 yuan / 1.52 yuan/ 1.86 yuan, corresponding to 16.96 times / 14.16 times / 11.59 times of PE. Taking 2022 as the benchmark, the company will be given 18-20 times PE, corresponding to a reasonable price range of 27.36-30.40 yuan. Maintain the company’s “recommended” rating.
Risk tips: changes in policy and supervision; Intensified market competition; The running water is less than expected; Product launch delay.
