\u3000\u3 China Vanke Co.Ltd(000002) 555 Wuhu 37 Interactive Entertainment Network Technology Group Co.Ltd(002555) )
Event: the company issued the annual report of 2021 and the performance forecast of the first quarter of 2022. In 2021, the company achieved a revenue of 16.22 billion yuan, a year-on-year increase of 12.6%, and a net profit attributable to the parent company of 2.88 billion yuan, a year-on-year increase of 4.2%; It is estimated that the net profit attributable to the parent company will reach 740770 million yuan in 22q1, with a year-on-year increase of 533.7% – 559.4%, mainly due to the different life cycles of the main game products operated in the reporting period and the same period in 2021.
“Integration of research and operation” has been steadily promoted, and the main business has continued to grow. 1) R & D side: build a self-research team with Guangzhou as the core and Suzhou, Xiamen, Wuhan, Chengdu and other places as the fulcrum to attract diversified talents; R & D investment continued to increase. In 2021, the company invested 1.25 billion yuan in R & D, a year-on-year increase of 12.4%, the R & D expense rate was 7.7%, and there were more than 1900 R & D personnel, accounting for 49% of the total employees; 2) Operation side: insight into market changes, optimize products, improve success rate and prolong product LTV. Under the strategy of “integration of research and operation”, the company’s game R & D and operation capacity continues to improve, and its performance is expected to continue the steady growth trend.
There are abundant reserve projects, and the game has broad prospects for going to sea. The company’s overseas business revenue was 4.78 billion yuan, with a year-on-year increase of 122.9%. The highest monthly flow of mobile games issued overseas exceeded 700 million, and the total number of new registered users exceeded 55 million. The overseas income of many games such as “Puzzles & survival”, “call me the big shopkeeper”, “song of Cloud City”, “Douluo mainland: duel of soul masters” increased across the board. As of December 2021, the cumulative flow of “Puzzles & survival” had exceeded 2.5 billion yuan, Ranked No. 4 in the global mobile game revenue growth list of sensortower in 2021; “Song of Cloud City” has successfully entered the top 5 of the best seller list in South Korea after it was launched in the South Korean market. The company reserves nearly 30 products, including MMORPG, cards, SLG and other categories, with broad development prospects.
Invest in the meta universe to enable the development of the main business. The company closely follows the development rhythm of the meta universe and invests in and arranges a number of high-quality tracks related to the meta universe. At present, the meta universe related enterprises invested or acquired by the company include archiact, waveoptics, raxium, digilens, chenjing technology, yingmu technology, Guangzhou semiconductor, etc. in the future, it is expected to enable the main business development of the company through the integration of technology and high-quality content.
Profit forecast and investment suggestions. It is estimated that the net profit attributable to the parent company from 2022 to 2024 will be 3.3 billion yuan, 3.73 billion yuan and 4.38 billion yuan respectively, and the corresponding PE will be 14 times, 12 times and 11 times respectively. Considering the abundant reserves of the company, overseas business may build a strong performance growth pole and maintain the “buy” rating.
Risk warning: the risk that the industry development is less than expected, the risk of macroeconomic fluctuations, the risk of national policy adjustment, and the risk that the effect of going to sea is less than expected.
