\u3000\u3 Shengda Resources Co.Ltd(000603) 533 Ireader Technology Co.Ltd(603533) )
Event: Ireader Technology Co.Ltd(603533) released the annual report of 2021, and the company achieved a total operating revenue of 2.071 billion yuan, a year-on-year increase of 0.49%; The net profit attributable to the parent company was 151 million yuan, a year-on-year decrease of 43%.
Comments:
Free reading has become the main driving force of revenue growth, and its future growth depends on improving the value of single users. During the reporting period, the company achieved an operating revenue of 2.07 billion yuan (+ 0.49%), including 1.56 billion yuan (+ 1.44%) from digital reading platform, 480 million yuan (- 4.20%) from copyright products and 30 million yuan (+ 40.23%) from other products. The highlight of the company’s revenue mainly lies in the growth of advertising business as the main source of the company’s operating revenue growth: during the reporting period, the company vigorously developed free reading business, which is at the leading level in the industry in terms of content accumulation, delivery efficiency, operation efficiency and commercialization; The average number of monthly active users of the company’s digital reading platform reaches 150 million. Through the integrated development mode of “payment + free”, the company refined the operation flow and improved the commercial value of the platform. We believe that relying on massive and high-quality digital reading content resources and huge user groups, the company is expected to continue to improve single user value in the future with the continuous optimization of content library and operation efficiency.
Optimizing channel costs helped increase gross profit margin, and sales expenses and management expenses dragged down performance. During the reporting period, the company’s gross profit margin increased by 6.54 PCTs to 52.49% year-on-year through channel cost optimization and copyright cost optimization. In terms of business: the company optimized the development of pre installed business of mobile terminal manufacturers, the channel cost decreased by 28.87% to 320 million yuan year-on-year, the growth rate of free reading business superimposed with high gross profit margin was higher, and the gross profit margin of the company’s digital reading platform business increased by 6.09pcts to 47.88%; The company optimized the copyright cost, and the gross profit margin of copyright product business increased by 9.28pcts. On the expense side, the company increased its marketing efforts in the second half of 2021, resulting in a year-on-year increase of 41.03% to 680 million yuan in annual sales expenses, with a sales expense rate of 32.59%; The company increased the introduction of middle and senior talents, resulting in a year-on-year increase of 43.40% to 110 million yuan in management expenses, and the current management expense rate was 5.5%. In the future, with the further optimization of the company’s channels and the stable growth of users, the sales expense rate is expected to be optimized.
The animation first strategy drives high-quality IP value-added, and the reading sea business continues to make efforts. The company has made positive progress in IP derivative services. By building a short video content matrix MCN, the company has created a new traffic position for IP value-added and publicity; Drive high-quality IP value-added through the animation first strategy. In addition to the series of “Yuanlong”, IP adapted animation works such as “peerless Wu soul” and “Wu Ying 3000 Tao” are popular in Tencent animation. In terms of reading and going to sea, the company has deeply cultivated the traditional advantageous markets in Europe and America, vigorously promoted the layout of emerging markets in Southeast Asia such as the Philippines and Indonesia, accelerated the construction of localized content ecology, further improved the number of high-quality authors, and new businesses such as IP derivatives and going to sea are expected to become new growth points of the company.
Profit forecast and rating: the company has rich digital content reserves and strong fine operation flow capacity. We are optimistic about the room for the improvement of the company’s single user value. It is estimated that the company’s net profit attributable to the parent company from 2022 to 2024 will be 196 million yuan, 272 million yuan and 386 million yuan respectively, corresponding to the existing share price PE of 30x, 21x and 15x respectively, maintaining the “strongly recommended” rating.
Risk tips: (1) the growth of users is less than expected; (2) The user payment rate is lower than expected; (3) The company’s free reading business is less than expected, resulting in the decline of the market.
