\u3000\u3 China Vanke Co.Ltd(000002) 555 Wuhu 37 Interactive Entertainment Network Technology Group Co.Ltd(002555) )
Event:
The company announced that in the first quarter report of 2022, the operating revenue was 4.09 billion yuan, yoy + 7.1%, the net profit attributable to the parent was 760 million yuan, yoy + 550.8%, and the non net profit attributable to the parent was 760 million yuan, yoy + 197743%.
Key investment points:
The net profit attributable to the parent company in 2022q1 achieved a year-on-year increase of 550.8%, and the overseas revenue accounted for more than 34%. The revenue of 2022q1 is 4.09 billion yuan (YoY + 7.1%, qoq-0.4%), and the net profit attributable to the parent company is 760 million yuan (YoY + 550.8%), which is mainly due to the key products entering the performance release period and the steady progress of business at home and abroad: ① the key marine product “doomsday noise” was launched in August 2020, 2021q1 is in the promotion period, and 2022q1 products enter the performance release period and contribute profits stably; ② Because the company’s game business has the characteristics of investment first and then recycling, 2021q1 launched new products such as glory archangel, Douluo continent: Awakening of the soul of Wu and the Immortal King, resulting in the current sales expense growth rate higher than the revenue growth rate, which has a phased impact on the net interest rate of 2022q1. In 2022q1, these products have entered a growth period, and the product life cycle has been continuously extended to continuously contribute profits; ③ China’s Douluo mainland: duel between soul masters, song of Cloud City and other products performed stably. In 2022q1, the company’s overseas market revenue exceeded 1.4 billion yuan, with a year-on-year increase of 45%, accounting for more than 34%, an increase of 4.8pct compared with the whole year of 2021. It is jointly driven by products such as Douluo continent: duel between soul masters, doomsday noise, call me big shopkeeper, song of cloud going to the city and beauty of rivers and mountains. As of March 2022, the cumulative flow of “doomsday noise” has reached 3.47 billion yuan, and the cumulative flow of 2022q1 has reached 840 million yuan, ranking the highest in the 8th and 5th best-selling list of IOS in the United States and Japan, reaching a new high. On the cost side, the operating cost of 2022q1 was 560 million yuan (YoY + 8%, qoq-10.8%), and the gross profit margin remained relatively stable at 86.3%. On the expense side, the sales expense of 2022q1 is 2.31 billion yuan (yoy-17.6%), and the sales rate is 56.4%, which is mainly due to the large number of online new tours and large promotion investment in 2021q1, the R & D expense is 276 million yuan (yoy-15.1%), and the R & D rate is 6.7%. On the profit side, the net interest rate in 2022q1 was 18.4%, a year-on-year increase of 15pct. The non net profit deducted in 2022q1 was 762 million yuan (YoY + 197743%), and the non recurring profit and loss was -1.969 million yuan, mainly including the profit and loss from changes in fair value and investment income of -10.024 million yuan, government subsidy of 9.38 million yuan, etc. The income tax rate of 2022q1 is 11.6%, which is 0.7pct lower than that of 2021.
Nearly 30 products are reserved, including MMO, cards, SLG, simulation and other tracks. Many overseas reserved products may be in the online test stage. The self-developed projects of the reserve part include MMO “code magic m”, “code ancient style”, “code 3D version WTB”, “code ancient style”, card “code C6”, “Douluo continent: duel of soul masters” (overseas version), SLG “code Three Kingdoms by”, “code AOE”, and simulated operation “code CY”. Among the reserved products, “dream of sailing”, “dawn plan”, “fortress of the air: sailing” and “the last primitive man” have obtained the Chinese version number. Overseas “Douluo mainland: duel between soul masters” has been launched in Xinma, Hong Kong, Macao and Taiwan. It is expected to further expand the regional coverage. Code C6 “,” Three Kingdoms: glory of heroes “and” ant Legion “may be in the online test stage, and it is expected to be launched in the near future.
Profit forecast and investment rating: under the diversification strategy, the company’s revenue structure continues to be optimized, the overseas proportion continues to increase, the stable operation of the key product P & S improves the stability of performance, and the subsequent overseas product matrix is rich, which is expected to go further; China’s game sector policy has entered a stable period. We expect the net profit attributable to the parent company from 2022 to 2024 to be RMB 3.31/38.2/4.33 billion, corresponding to EPS of RMB 1.5/1.7/2.0 and PE of 16 / 14 / 12x, maintaining the “buy” rating.
Risk tips: public opinion risk, policy risk, increased competition risk, exchange rate risk, risk that the progress and performance of new products are less than expected, risk that the flow cost increases, risk that the life cycle of old products is less than expected, risk that the version number is obtained, risk of core brain drain, risk of player preference change, risk that the technology development is less than expected, risk of corporate governance / asset impairment / lifting the ban and reducing holdings, downside risk of the industry valuation center Overseas market related risks, etc.
