\u3000\u3 China Vanke Co.Ltd(000002) 555 Wuhu 37 Interactive Entertainment Network Technology Group Co.Ltd(002555) )
Key investment points
Event: in 2021, the company realized an operating revenue of 16.216 billion yuan, yoy + 12.62%, net profit attributable to the parent company of 2.876 billion yuan, yoy + 4.15%, deducting non attributable net profit of 2.627 billion yuan, yoy + 9.82%. At the same time, it plans to distribute cash dividend of 3.70 yuan to all shareholders for every 10 shares, and the performance exceeds the previous forecast range. In addition, the company expects to realize the net profit attributable to the parent company of 740770 million yuan in 2022q1, with a year-on-year increase of 533.71% – 559.40%, deducting the net profit not attributable to the parent company of 740770 million yuan, with a year-on-year increase of 1920217% – 1998469%.
Comments: the results of self research and going to sea are becoming more and more obvious, and the profit of Q4 reached a new high in a single quarter. 2021q4 company’s sales expenses narrowed and some games entered the payback period, the performance was released, and the net profit attributable to the parent and deducting non attributable to the parent hit a record high, with a year-on-year increase of 130.54% and 151.26% respectively, and a month-on-month increase of 33.08% and 25.65%; The sales expense ratio is 45.12% (yoy-3.92pct, qoq-9.28pct), and the net profit margin of sales is 27.91% (YoY + 9.26pct, QoQ + 9.09pct). In 2021q4, the sea water continues to rise, and the self-developed product Douluo mainland: soul master duel ranks 13th on average in the best-selling list of IOS games. The main games continue to perform steadily. We believe that with the game entering the payback period, the company’s profits are expected to be released steadily.
Overseas business income continues to reach a new high and is optimistic that going to sea will become the second growth pole. In 2021, the company’s overseas revenue was 4.777 billion yuan (YoY + 122.94%), accounting for 29.46% (YoY + 14.58pct). According to appannie, 2021m1-m12 company has risen from No. 9 to No. 5 among Chinese sea going manufacturers, with remarkable results. According to sensortower, among the top 30 mobile travel revenue in 2021, “Puzzles & survival” and “beauty of rivers and mountains” ranked 9th and 27th respectively, and their long-term operation was stable. Among them, the water flow in Japan and the United States of the “P & S” category of Sanxiao + SLG increased year-on-year. The average ranking in the best-selling list of IOS games in Japan and the United States in 2021q4 was 15 and 32 respectively. As of December 2021, its cumulative water flow had exceeded 2.5 billion yuan; “Song of Cloud City” opened the Korean market with deep localized distribution, ranking top 4 in 2021q3 mobile tourism revenue in Korea and China. After going online for half a year, the revenue increased inversely. The company’s “adjusting measures to local conditions” sea strategy and strong distribution capacity continued to be verified. We believe that as “P & S” and other products enter the profit recovery period, and the revenue of “song of cloud going to the city” and Xinyou continues to rise, the overseas business will steadily contribute to the revenue and profit increment.
Rich product reserves, overseas market expansion can be expected. The company’s self-developed products have gradually achieved results, the overseas market has achieved a breakthrough in long-term categories, and the reserve of follow-up products is sufficient. It is expected to steadily increase the market share through the multi theme and multi IP product matrix. SLG Chrono legacy, ant legion, Three Kingdoms SLG and other products have been tested overseas.
Announce the fourth phase of employee stock ownership plan, taking into account the short-term and long-term development interests of the company. The company announced the fourth phase of the employee stock ownership plan (Draft). The performance evaluation index is that based on the revenue and net profit attributable to the parent in 2021 (excluding the share based payment expenses generated by the employee stock ownership plan), the growth rate of revenue or net profit attributable to the parent in 20222024 shall not be less than 15% / 25% / 35% respectively.
Profit forecast and investment rating: considering the impact of the epidemic and equity incentive fees, we slightly reduced EPS from 2022 to 2024 to 1.51/1.82/2.16 yuan (the original value from 2022 to 2023 was 1.57/1.86 yuan), corresponding to the current share price PE of 13 / 11 / 9x respectively. We are optimistic that the company will continue to promote the “dual core + diversified” strategy, drive performance growth at home and abroad, and maintain the “buy” rating.
Risk tips: industry policies are tightened; The performance of new products is less than expected; The overseas market is not progressing as expected.
