\u3000\u3 China Vanke Co.Ltd(000002) 555 Wuhu 37 Interactive Entertainment Network Technology Group Co.Ltd(002555) )
Event overview
On the evening of April 25, 2022, Wuhu 37 Interactive Entertainment Network Technology Group Co.Ltd(002555) released the 2021 annual report and the performance forecast for the first quarter of 2022. In 2021, the company achieved a revenue of 16.216 billion yuan, a year-on-year increase of 12.62%; The net profit attributable to the parent company was 2.876 billion yuan, a year-on-year increase of 4.15%, and the net profit not attributable to the parent company was 2.627 billion yuan, a year-on-year increase of 9.82%. In Q4 of 2021, the revenue was 4.106 billion yuan, a year-on-year increase of 32.01%, the net profit attributable to the parent was 1.154 billion yuan, a year-on-year increase of 130.54%, and the net profit not attributable to the parent was 1.108 billion yuan, a year-on-year increase of 151.26%. In 2022, Q1 is expected to realize a net profit attributable to the parent company of 740770 million yuan, with a year-on-year increase of 533.71% to 559.40%; Net profit deducted from non parent company was 740770 million yuan, with a year-on-year increase of 1920217% – 1998469%.
The profits of boutique new tours are released, the reserves are diversified, and the follow-up is strong
In 2021, the company’s mobile game business achieved a revenue of 15.364 billion yuan, with a year-on-year increase of 15.55%. China’s new tour “Douluo mainland: duel between soul masters”, “glory Archangel” and “Douluo mainland: Awakening of Wu soul” had a steady flow, and the global distribution of “Puzzles & survival”, “call me big shopkeeper” and “song of Cloud City” performed well. The strategy of product boutique and market globalization was clear, and the diversified product matrix has begun to take shape. The company’s game business has the characteristics of first investment and then recovery. In the same period last year, the new online games entered a growth period, and the profits were released in 2022q1. After the restart of the superimposed version number, the existing reserves were launched one after another. Nearly 30 new games at home and abroad cover different categories such as MMORPG, cards, SLG and simulated operation. It is expected to continue to make steady efforts and contribute to the flow of water.
The performance of overseas markets is beautiful, and the second growth curve of game business is consolidated
The company made a significant breakthrough in its global strategic layout. In 2021, the overseas business revenue was 4.777 billion yuan, a year-on-year increase of 122.94%, and the proportion of revenue increased to 29.46%. The overseas brand 37games covers a number of countries and regions, involving multiple tracks such as SLG, MMORPG, simulation operation and cards. The maximum monthly flow of mobile games issued exceeds 700 million, the new registered users exceed 55 million and the maximum monthly active users exceed 8.5 million. Under the strategy of localized distribution and publicity, a variety of overseas revenue increased across the board. In 2021, the company ranked among the top 10 in the list of overseas revenue of Chinese game manufacturers for many consecutive months. With the recovery of early investment and the expansion of overseas markets, the overseas business has become the second driving force for the steady development of the company and will continue to increase its performance.
Self research and overweight, streamlined team, and employee stock ownership plan show performance confidence
The company achieved risk control in the whole process of R & D, effectively controlled costs and improved the success rate of R & D. in 2021, the R & D investment was 1.25 billion yuan, with a year-on-year increase of 12.37%, and the R & D expense rate was 7.71%, a slight decrease of 0.02pct. The number of R & D personnel of the company decreased by 16.47% year-on-year, and the proportion of highly educated personnel increased. R & D personnel were allocated according to the track to further concentrate resources to form a joint force and improve self-research efficiency. On April 26, the company issued the fourth employee stock ownership plan (Draft). The performance target is that the growth rate of revenue in 2022 / 2023 / 2024 corresponds to no less than 15% / 25% / 35% in the base period of 2021, or the growth rate of net profit is no less than 15% / 25% / 35%, and the unlocking proportion at the company level is 30%, 30% and 40% respectively. The continuous and steady growth target shows performance confidence.
Investment suggestion: maintain the “overweight” rating
Combined with the company’s annual report and the forecast of the first quarterly report, we adjusted the company’s forecast of revenue of 19.086219.86 / (unpredicted) billion yuan in 20222024 to 18.823208.99/22.873 billion yuan, adjusted the forecast of net profit attributable to the parent company of 30.78/36.14 / (unpredicted) to 33.64/37.68/41.43 billion yuan in 20222024, and adjusted EPS 1 The forecast of 39 / 1.63 / (unpredicted) yuan is 1.52/1.70/1.87 yuan, corresponding to the closing price of 21.00 yuan / share on April 26, 2022, and PE is 14, 12 and 11 times respectively. With the re issuance of the game version number, the industry regulation is becoming clearer and clearer. At the same time, the company has broad space for overseas business expansion and continues to invest in the research and development of high-quality products. We believe that the company’s future performance growth is stable and sustainable. The current valuation level is at the historical low of the industry and maintains the rating of “overweight”.
Risk tips
Game version number policy shrinkage risk; Xinyou test is less than expected risk; Risk of cancellation of preferential tax policies; Brain drain risk.
