\u3000\u3 China Vanke Co.Ltd(000002) 555 Wuhu 37 Interactive Entertainment Network Technology Group Co.Ltd(002555) )
Core view
The performance of 21 years exceeded the upper limit of the forecast, and continued to maintain high growth in the first quarter. 1) The company announced that in 2021, it will achieve an operating revenue of 16.2 billion yuan and a net profit attributable to the parent company of 2.875 billion yuan, with a year-on-year increase of 12.62% and 4.15% respectively, corresponding to EPS of 1.31 yuan, which is higher than the upper limit of performance forecast (the net profit attributable to the parent company of 2.8-2.85 billion yuan). In Q4 of 21 years, the operating revenue was 4.106 billion yuan and the net profit attributable to the parent company was 1.154 billion yuan, with a year-on-year increase of 32.0% and 130.5% respectively, corresponding to a fully diluted EPS of 0.52 yuan, continuing to maintain a high growth rate; The high performance growth is mainly due to the excellent performance of many new online games and the rapid growth of overseas markets; 2) The company released the performance forecast of Q1 in 2022, and it is expected to realize the net profit attributable to the parent company of 740770 million yuan, a year-on-year increase of 534559%; 3) In the 21st year, it is planned to distribute a cash dividend of 3.70 yuan (including tax) to all shareholders for every 10 shares, no bonus shares and no capital reserve to increase share capital.
High quality products, diversification and market globalization continued to advance. 1) In terms of new products, during the reporting period, the newly launched “Douluo mainland: duel between soul masters”, “glory Archangel”, “Douluo mainland: Awakening of Wu soul”, as well as the global release of “Puzzles & survival”, “call me shopkeeper”, “song of Cloud City” and other games performed well. Among them, “Douluo mainland: duel between soul masters” has performed well since its launch, ranking the top 4 in the best-selling list of IOS games, ranking 11th on average, verifying the company’s boutique strategy. At the same time, the project approval categories of self-developed reserve products involve multiple categories such as MMORPG, SLG, card and simulated operation, and the product categories continue to be diversified; 2) Overseas revenue reached 4.777 billion yuan, a year-on-year increase of 122.94%, accounting for 29.5% of revenue; The company’s overseas brand 37games covers many countries and regions, and the types of games include SLG, MMORPG, simulation operation, cards, etc. During the reporting period, the maximum monthly flow of mobile games issued overseas by the company exceeded 700 million, the total number of new registered users exceeded 55 million, the maximum monthly active users exceeded 8.5 million, and the performance of overseas business was excellent; 3) In terms of new products, in 2022, the company adhered to the strategy of high-quality products, diversification and market globalization, and reserved nearly 30 products at home and abroad through self-research, agency and customization, which is expected to promote the company’s game business to continue to maintain high growth.
Equity incentives help long-term growth. The company issued the fourth phase of the employee stock ownership plan (Draft), which plans to encourage no more than 650 people with 16.3 million shares repurchased in the special securities account. The price of the repurchased shares of the transferee company is 0 yuan / share, the duration is 72 months, and the assessment conditions are that the operating revenue in 2022 / 23 / 24 is not less than 18.6/203/21.9 billion yuan or the net profit is not less than 3.3/36/3.9 billion yuan respectively.
Risk tip: the flow of new game products does not meet expectations; The profit of going to sea is lower than expected; Regulatory policy risk, etc.
Investment advice: maintain the profit forecast and maintain the “buy” rating. We maintain the 22 / 23 profit forecast and add a 24-year profit forecast. It is estimated that the net profit attributable to the parent company in 2022 / 23 / 24 will be 3.33/38/4.3 billion yuan respectively, with a year-on-year growth rate of 16 / 15 / 12%; Diluted EPS = 1.50/1.72/1.92 yuan, and the current share price corresponds to PE = 14 / 13 / 11x. The company’s issuance business continued to maintain a leading position, its product self-research performance was good, its overseas expansion was smooth, and its “buy” rating was maintained.
