\u3000\u3 China Vanke Co.Ltd(000002) 624 Perfect World Co.Ltd(002624) )
Event:
1. The company announced in the 2021 annual report that the operating revenue was 8.52 billion yuan, yoy-16.7%, the net profit attributable to the parent was 370 million yuan, yoy-76.2%, and the non net profit attributable to the parent was 100 million yuan, yoy-90.3%. The dividend of 12 yuan (including tax) is paid for every 10 shares in the current period. Based on the closing price on April 25, the dividend rate is 10%, and the cash dividend amount is 2.29 billion yuan.
2. The company announced that in the first quarterly report of 2022, the operating revenue was 2.13 billion yuan, yoy-4.6%, the net profit attributable to the parent was 840 million yuan, yoy + 81%, and the non net profit attributable to the parent was 410 million yuan, yoy + 30.2%.
Key investment points:
The in-depth adjustment of overseas game business in 2021 led to a phased decline in 2021q4 profits. The company’s annual revenue in 2021 was 8.52 billion yuan (yoy-16.7%), including game business revenue of 7.42 billion yuan (yoy-19.8%), film and television business revenue of 950 million yuan (YoY + 1.8%), 2021q1 / Q2 / Q3 / Q4 revenue of 22.3/19.8/25.3/1.78 billion yuan respectively, yoy-13.3% / – 23.1% / – 13.2% / – 17.8%. On the cost side, in 2021, the operating cost was 3.28 billion yuan, the overall gross profit margin remained stable at 61.5%, and the gross profit margin of game business was 66.6%, an increase of 1.4pct year-on-year. On the expense side, in 2021, the annual sales expense was 1.99 billion yuan (YoY + 8.5%), and the sales expense rate was 23.3%, with a year-on-year increase of 5.4pct, mainly due to the launch of new games and the increase of publicity and promotion expenses; The R & D expenditure was 2.21 billion yuan (YoY + 39.1%), and the R & D expenditure rate increased by 26% year-on-year by 10.5pct, mainly due to the increase in the number of games under research, personnel optimization and adjustment of salary policies. By the end of 2021, the company had 4255 R & D personnel (YoY + 13.8%), accounting for 67.8% of the total number of employees. On the profit side, the company deducted non net profit of 100 million yuan (yoy-90.3%) and non net interest rate of 1.2% in 2021, with a year-on-year decrease of 9pct and non recurring profit and loss of 270 million yuan, mainly including 460 million yuan of equity disposal income of subsidiaries and associates, 360 million yuan of investment loss of global film and 71.33 million yuan of government subsidy.
2022q1 “magic tower” and “dream new kill immortal” contributed to the performance increment, and the net profit deducted from the game increased by 34.5%. In 2022q1, the revenue was 2.13 billion yuan (yoy-4.6%), a year-on-year decrease, mainly due to the company’s adjustment of the layout of overseas game business, including game business revenue of 1.97 billion yuan (YoY + 23%), deduction of non net profit of 450 million yuan (YoY + 34.5%), and film and television business revenue of 77.32 million yuan (yoy-80.5%). The game business 2022q1 is mainly contributed by old games such as “magic tower” and “dream new kill immortal” launched in December 2021. On the cost side, the operating cost of 2022q1 was 670 million yuan (yoy-31.1%), a year-on-year decrease, which was mainly affected by the change of revenue structure of game and film and television business. On the expense side, in 2022q1, the sales expense was 280 million yuan (yoy-9.5%), and the R & D expense was 560 million yuan (YoY + 35.9%), which was mainly due to the increase in the salary of R & D personnel compared with the same period in 2021. On the profit side, the company deducted a non net profit of 410 million yuan (YoY + 30.2%) in 2022q1, and the non recurring income of 430 million yuan was mainly from the sale of American R & D teams and relevant local distribution teams in Europe and America.
China’s “magic tower” and “Mengzhu” have a stable performance and are expected to contribute to the performance stably throughout the year. Overseas will focus on the two dimensions of “Chinese products going to sea + overseas localization development”. The overseas version of “magic tower” has been tested. China focuses on the two core tracks of “MMO + X” and “card + X”. The magic tower launched in December 2021 is the representative work of the company’s diversified integration from young to categories, with a record of more than 10 million new users in the first month and nearly 500 million yuan in the first month. The “villa time and space” version of magic tower 2.0 was launched on April 25, with a significant rise in the ranking. As of 13:00 on April 26, it ranked 12th in the IOS best-selling list. In terms of going out to sea, fantasy new kill immortal was launched in the markets of Hong Kong, Macao, Taiwan, Southeast Asia and South Korea on March 17. The overseas version of fantasy tower has been tested in many overseas places on April 19. Most overseas regions are represented by Tencent’s overseas distribution brand level infinite, which is expected to be officially launched in 2022.
The three new mobile games are expected to be launched in the Chinese market within this year. The film and television business will continue to promote the issuance and scheduling of inventory projects, and adopt a more focused strategy for project initiation and startup. ① Reserve of game products: Mobile Games “Tianlong Babu 2”, “Kingdom of morning and night” and “black cat anecdote society” are expected to go online within the year, and the rest reserves include “one punch Superman: the world”, “million King Arthur”, “killing immortal 2”, “perfect Shanghai New World Co.Ltd(600628) ” God and devil mainland 2 “; The end game “Zhuxian world” has obtained the edition number and started large-scale testing during the year. Other end games reserve “perfect new world” and other well-known IP game products such as Linglong and Fengshen series are also under development. ② Film and television product reserve: the green mountains in the moon are as light as a picture, the biography of Yunxiang, let your years be quiet, the stars condense into sugar, rock and roll crazy flower, special agent mission, brilliant! Brilliant “What you want”, “warm and sweet”, “just a Jianghu dream”, etc.
Profit forecast and investment rating: the company has strong R & D strength and is currently at the key node of transformation. The products represented by magic tower are the phased achievements of the company in actively seeking innovation and breakthrough. It is suggested to pay attention to the sea performance of magic tower and the overseas test performance of new products, the market performance of magic tower version 2.0, the overseas independent distribution and the subsequent distribution of game version numbers. We expect the net profit attributable to the parent company from 2022 to 2024 to be RMB 1.78/2.19/2.44 billion, corresponding to EPS of RMB 0.9/1.1/1.3 and PE of 14 / 12 / 10x, maintaining the “buy” rating.
Risk tips: tighter policy supervision, intensified market competition, less than expected progress in obtaining version number, less than expected progress and performance of new products, exchange rate fluctuations, rising flow costs, less than expected life cycle of old products, loss of core talents, change of player preferences, corporate governance / asset impairment / lifting and reduction, market style switching, downward trend of Industry Valuation center, etc.
