\u3000\u3 China Vanke Co.Ltd(000002) 555 Wuhu 37 Interactive Entertainment Network Technology Group Co.Ltd(002555) )
Event: Wuhu 37 Interactive Entertainment Network Technology Group Co.Ltd(002555) released the annual report of 2021 and the forecast of the first quarterly report of 2022.
Annual report of 2021: during the reporting period, the total operating revenue was 16.217 billion, a year-on-year increase of 12.62%, the net profit attributable to the parent was 2.876 billion, a year-on-year increase of 4.15%, the net profit attributable to the parent after deduction was 2.627 billion, a year-on-year increase of 9.82%, the total operating revenue in the single quarter of 2021q4 was 4.106 billion, a year-on-year increase of 32.01%, a month-on-month decrease of 10.2%, the net profit attributable to the parent was 1.154 billion, a year-on-year increase of 130.54%, and a month-, After deduction, the net profit attributable to the parent company increased by 1.108 billion, a year-on-year increase of 25.06%. In 2021, the company plans to distribute a cash dividend of 3.70 yuan (including tax) for every 10 shares.
Performance forecast for the first quarter of 2022: during the reporting period, the net profit attributable to the parent company is expected to be 740 ~ 770 million yuan, with a year-on-year increase of 533.71% ~ 559.40%, and the net profit attributable to the parent company after deduction is still 740 ~ 770 million yuan, with a year-on-year increase of 1920217% ~ 1998469%.
Employee stock ownership plan: the company promotes the fourth phase of employee stock ownership, with no more than 650 planned personnel and 7 directors, senior executives and supervisors. The source of shares is the company’s share repurchase, with a total of 16301534 shares, accounting for 0.74% of the total share capital and an average price of 18.4 yuan per share. It is unlocked in three phases. The unlocking conditions are that the income growth in 2022, 2023 and 2024 will not be less than 15%, 25% respectively 35% (based on 2021) or net profit growth of no less than 15%, 25% and 35% (based on 2021).
Comments:
In 2021, the overseas market will be the core of future growth. In 2021, the company’s performance showed a trend of trough climbing and fluctuation rising. In the fourth quarter, the net profit attributable to the parent company in a single quarter reached 1.154 billion, a record high. We believe that there are two factors driving it together: 1) the excellent performance of Chinese new products hedged the decline of stock products. In 2021, the company’s self-developed new product “Douluo continent: duel between soul masters” and its agent new product “Douluo continent: Awakening of Wu soul” both achieved good results, Douluo mainland: duel between soul masters: the global water flow in a single month exceeded 700 million, making the company’s Chinese end revenue only decline by 6.7% under the background of high base + strict policy in the Chinese market in 2020; 2) Overseas market has become a new breakthrough point: in 2021, the company’s overseas market revenue reached 4.78 billion yuan, with a year-on-year increase of 122.9%. The annual flow of “Puzzles & survival” reached 2.5 billion yuan. Benefiting from overseas excellent performances such as “Puzzles & survival”, “call me big shopkeeper”, “song of cloud going to the city”, “Douluo continent: duel of soul masters”, the company won the second place in the 2022 overseas leap list selected by app Annie, second only to MIHA tour.
The cost side remained basically stable. 1) Sales expense: the company’s sales expense ratio was 56.3% in 2021, down 0.7 percentage points from 2020; 2) Administrative expenses: the rate of administrative expenses in 2021 was 2.9%, 0.4 percentage points higher than that in 2020; 3) R & D expenses: the R & D expense rate in 2021 was 7.7%, the same as that in 2020.
Future product reserve: the strategy of high-quality products, diversification and market globalization. The categories include MMORPG, card, SLG and simulation operation. The reserve products include 2 self-developed SLG products, 7 agent SLG products, 3 self-developed MMORPG products, 5 agent MMORPG products, 1 self-developed card, 4 agent cards, 1 self-developed simulation operation and 2 agent simulation operation. At present, in overseas markets, I have the most money, ant legion, the Three Kingdoms: the glory of heroes and survival at gunpoint have been gradually promoted.
Profit forecast and Valuation: considering the company’s excellent overseas performance and abundant product reserves, as well as the expectation of the rebound of game profit margin in China and overseas markets, we raised the company’s profit forecast for 2022 and 2023. It is estimated that the company’s revenue in 2022 and 2023 will be 18.668 billion (original 18.407 billion) and 20.964 billion (original 20.541 billion), with a year-on-year increase of 15% and 12%, and the net profit attributable to the parent company will be 3.364 billion (original 2.87 billion) 3.814 billion (original 3.101 billion), with a year-on-year increase of 17% and 13%. The current market value corresponds to 13X and 12x PE in 2022 and 2023. It is recommended to continue to focus on and maintain the “buy” rating.
Risk tips: 1) stricter version number supervision policy; 2) The online time of the game is not up to expectations; 3) The risk that the information and data used in the research report are not updated in time.
