\u3000\u3 China Vanke Co.Ltd(000002) 555 Wuhu 37 Interactive Entertainment Network Technology Group Co.Ltd(002555) )
Event:
The company released the financial report for 2021 and the performance forecast for the first quarter of 2022: 1) the revenue in 2021 was 16.216 billion yuan, a year-on-year increase of 12.62%, the net profit attributable to the parent was 2.876 billion yuan, a year-on-year increase of 4.15%, and the net profit not attributable to the parent was 2.627 billion yuan, a year-on-year increase of 9.82%; 2) 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% – 559.4%.
Comments:
The profitability of core games is stable, with a record high profit in the single quarter of 2021q4. The net profit attributable to the parent company in 2021q1 / Q2 / Q3 / Q4 was 1.17/7.37/8.67/1.154 billion yuan. The net profit attributable to the parent company in the single quarter of 21q4 reached a new high, and the performance of 21q4 and 2021 exceeded the market expectation. 21q4 game products have entered the profit release period: 1) Chinese buying products such as song of Cloud City, Immortal King and Archangel glory have performed steadily; 2) The self-developed boutique “Douluo mainland: duel between soul masters” 21q4 ranks fourth in the highest and 24th in the best-selling list of IOS; 3) In overseas markets, “song of Cloud City” (South Korea, Hong Kong, Macao and Taiwan), “Puzzles & survival” (focusing on European and American markets) and “call me big shopkeeper” (South Korea, Hong Kong, Macao and Taiwan) performed well. In 2022q1, the net profit attributable to the parent company is expected to be 740770 million yuan, with a year-on-year increase of 533.71% – 559.4% and a month on month decrease of 33.27% – 35.87%, mainly due to the performance fluctuation brought by the life cycle of game products. In addition, the company focused on MMORPG, SLG, cards, simulated operation and other major tracks. The 2021 annual report disclosed that it had reserved 7 MMOs, 6 SLGS, 5 cards and 2 Sims in China, 6 MMOs, 5 SLGS, 3 cards and 2 Sims overseas.
The gross profit margin was high and stable, the flow cost was generally controllable, and the R & D rate decreased slightly. 2021q1 / Q2 / Q3 / Q4 gross profit margin is 86.40% / 85.14% / 84.82% / 84.79%, which remains high and stable. 21q4 did not launch heavy new products, and the sales rate fell below 50% (45.12%) for the first time in four consecutive quarters, a significant decrease of 28.23 percentage points compared with 21q1. 21q4 R & D rate fell slightly to 6.30% for two consecutive quarters. By the end of 2021, there were 1957 R & D personnel, accounting for 48.97%.
Seagoing products have made outstanding achievements and have become the second growth pole. In 2021, the operating revenue of overseas business was 4.777 billion yuan, with a year-on-year increase of 122.94%, ranking the top 10 in the global revenue ranking of Chinese mobile game publishers of sensor tower, the highest and ranking the fourth. Among them, the cumulative flow of “Puzzles & survival” has exceeded 2.5 billion yuan (as of December 2021). After being launched into the Korean market, the ranking of “song of cloud going to the city” has risen rapidly and ranked among the top 20 in the overseas revenue list of domestic mobile games.
Investment suggestion: maintain the “Buy-A” rating. The company has a strong distribution capacity and self-research strength to accelerate the breakthrough of product categories, and is optimistic about the robustness of Chinese products and the high potential of overseas markets. It is estimated that the operating revenue of the company from 2022 to 2024 will be 19.78/22.95/25.7 billion yuan, the net profit attributable to the parent company will be 3.04/33.9/3.85 billion yuan, and the corresponding EPS will be 1.43/1.62/1.86 yuan. Considering the valuation premium of the company’s A-share game leader, 20xpe is valued in 2022, corresponding to the six-month target price of 28.6 yuan.
Risk tips: the risk of game running water falling short of expectations, the risk of traffic price increase, and the risk of new tour landing falling short of expectations.
