\u3000\u3 China Vanke Co.Ltd(000002) 555 Wuhu 37 Interactive Entertainment Network Technology Group Co.Ltd(002555) )
The company issued the annual report for 2021 and the performance forecast for the first quarter of 2022. In 2021, the operating revenue reached 16.216 billion yuan, a year-on-year increase of 12.62%; The net profit attributable to the parent company was 2.876 billion yuan, a year-on-year increase of 4.15%; The net profit attributable to the parent company after deduction was RMB 2.627 billion, a year-on-year increase of 9.82%. In the first quarter of 2022, the net profit attributable to the parent company is expected to be 740770 million yuan, with a year-on-year increase of 533.71% – 559.40%; The net profit attributable to the parent company after deducting non profits was 740 million yuan – 770 million yuan, with a year-on-year increase of 1920217% – 1998469%.
Key investment points:
The performance of core products is stable, and the strategy of diversification and high-quality products has achieved initial results. The company’s mobile game revenue in 2021 was 15.364 billion yuan, a year-on-year increase of 15.55%. The product categories are diversified and the quality is improved. In 2021, the online products Douluo continent: duel of soul masters, Douluo continent: Awakening of Wu soul, glory archangel, and the global products Puzzles & survival, call me shopkeeper, song of Cloud City and other games performed well. Among them, “Douluo mainland: duel between soul masters” ranked 11th on average in the IOS best seller list, and rose to 4th at the highest.
Excellent performance in overseas markets, creating a new growth curve. By region, the company’s operating revenue from overseas regions reached 4.777 billion yuan, a year-on-year increase of 122.94%. Expand the global market through diversified high-quality games, issue different types of game products according to the characteristics of the local market, and differentiate the promotion materials and game content to realize the strategy of “adjusting measures to local conditions”. In 2021, the company issued mobile game products overseas with a maximum monthly flow of more than 700 million, a total of more than 55 million new registered users and a maximum monthly active users of more than 8.5 million. According to sensortower data, the company ranked fourth in the global revenue of Chinese mobile game publishers in March 2022, second only to Tencent, Netease and MIHA. Its products “Puzzles & survival” and “song of Cloud City” ranked fifth and 14th in the overseas revenue list of Chinese mobile games in March respectively. The company’s globalization ability is prominent.
The project reserve implements the strategy of high-quality products, diversification and globalization. The company continues to adhere to the strategy of high-quality products, diversification and globalization, and reserves nearly 30 products through self-research, agency and customization. According to the company’s announcement, there are 20 game products under research and testing to be released in China, including 7 self-developed products; There are 16 game products in research and testing that will be released in overseas regions, including 8 self-developed products (there are repeated products overseas in China).
According to the latest batch of game version number information released by the State Press and Publication Administration on April 11, the company’s product “dream Voyage” is listed. After the resumption of normal development, the market’s regulatory concerns about game companies have been dispelled to a certain extent, and the games with version number will be transformed into the recovery and growth of performance fundamentals after they go online.
The product promotion period of 2021q1 led to a phased low profit, and 2022q1 achieved substantial growth. In 2021, Q1 company’s net profit in 2021q1 entered a phased low point because some game products launched in China and some new products launched in overseas markets were in the flow promotion period, and the sales expenses increased more. However, as the game products gradually enter the growth period, the running water and profits begin to be recovered, driving the Q1 net profit to achieve a more obvious growth in 2022, and the growth rate of net profit attributable to the parent company is more than 500%. Under the company’s long-term R & D and long-term operation ideas, the game products with good performance will continue to release performance in a longer cycle.
Investment advice and profit forecast: the company’s globalization, boutique and diversification strategy has been steadily promoted and gradually reflected in products and performance. Game categories have been broadened, product quality has been improved, and overseas revenue has made a breakthrough. According to the characteristics of game products, a large amount of cost investment is concentrated in the early stage. With the steady growth and release of game products, the profitability of the products is gradually improved, contributing more performance to the company
On April 11, the version number was re issued. From the number of products issued, the regulatory authorities guided the industry’s product supply to improve quality and reduce quantity. Game companies with strong R & D ability will have long-term competitiveness. In addition, through investment, the company has a layout in film and television, music, animation, VR / AR, metauniverse and other fields to feed the company’s main business.
It is estimated that the company’s EPS in 2022 and 2023 will be 1.48 yuan and 1.80 yuan. Calculated according to the closing price of 19.70 yuan on April 25, the corresponding PE will be 13.32 times and 10.96 times, maintaining the “buy” rating.
Risk warning: the release rhythm and quantity of version number are uncertain; Intensified competition in overseas markets; Product launch progress and market performance are lower than expected; Increase in purchase volume and price; Loss of core personnel
