Kingnet Network Co.Ltd(002517) new products are iterated efficiently, and the performance recovers rapidly

\u3000\u3 China Vanke Co.Ltd(000002) 517 Kingnet Network Co.Ltd(002517) )

Recently, the company released its annual report of 2027.2 billion yuan, with a revenue increase of 23.3% in the same quarter of 2021; The net profit attributable to the parent company was 577 million yuan, an increase of 224.14% at the same time, and the net profit attributable to the parent company after deduction was 464 million yuan, an increase of 501.23% at the same time. In the first quarter of 2022, the revenue was 1.029 billion yuan, an increase of 129.73% at the same time; The net profit attributable to the parent company was 248 million yuan, an increase of 66.66% at the same time.

Legendary games maintain efficient iteration, and "battle of angels" drives the high growth of Q1 performance. Driven by the core strategy of "focusing on the main business of the game", the company's existing products "primitive legend", "Legend of the king" and "high-energy hand group" maintain good revenue and profit contribution. The games such as "hot blood attack", "swordsman in Black: ace" and "Legend of demon heroes" launched in 21 years have contributed to the main performance increment. In 21 years, the company generated non recurring profit and loss of 113 million yuan, mainly from the investment income generated by the company's sale of part of the equity of its participating companies xinguangliumei and Hangzhou Tengmu, as well as the changes in the fair value of shares and equity held by the company. Over the past 22 years, the company's stock of games has remained stable, and the new products "battle of angels" and "xuanzhongji" Q1 have performed well after they were launched, driving Q1's revenue and profits to increase significantly. Generally speaking, the legendary business of the company continues to maintain the industry leadership, the response of self-developed and innovative products is good, and the previous profit expectation is basically fulfilled.

The three sectors of R & D, distribution, investment and IP keep pace, and the company's core competitiveness has been improved in all aspects. In terms of R & D, while consolidating the moat of traditional legendary and miracle game brands, the company actively carried out self-research and innovation. The self-developed IP projects "Legend of demon God hero" and "sword God domain Black Warrior: ace" were successfully launched and landed at the top of the IOS best-selling list. The company's product R & D ability has been verified by the market. In addition, the company's R & D system has been comprehensively restructured and adjusted to realize the standardization and modularization of the self-research system, and the R & D efficiency has been further improved. In terms of distribution, the company successfully completed the adjustment of the distribution business structure and realized the modularization of the distribution business. The company's well-known boutique game distribution platform XY game has launched more than 100 boutique games since its launch, covering a wide range of game types. Its products such as "Legend of demon heroes" and "zero front" have performed well. In terms of investment and IP, the company focuses on investing in the upstream and downstream industrial chain, creating a well-known IP matrix, further supplementing the company's product line through the layout of R & D studios with differentiated features and creative play methods, and promoting the strategic investment enterprises to form a strong business agreement with the company's issuance business sector. In 2021, we continuously deepened the research and development capabilities of the four emerging companies, namely, Xianjian and douchuan, and provided a positive impetus for the introduction of the four IP incubation projects in mainland China.

Build your own IP, go to sea with overweight games, and pay attention to meta universe opportunities. In order to enhance the company's core competitiveness, on the basis of continuing to consolidate the research and transportation capacity, the company has set three business development directions in 22 years: first, the company will use the writer village platform and well-known writers to incubate its own IP and build a comprehensive IP matrix; Secondly, the global expansion of business will become one of the core strategic themes. Starting from the project establishment, the company will invest in the global R & D team, realize the commercialization of cultural output + overseas local IP through high-quality operation, and drive the growth of overseas revenue; In addition, the company will continue to explore meta universe opportunities from both business and investment. The company's investment in Dapeng VR will give the company a certain first mover opportunity in the future meta universe layout.

Maintain the "buy" rating. The company adheres to the development strategic direction of "focusing on the main business of games", and the three business segments of R & D, distribution and investment + IP provide solid support for the company's performance. At the same time, the company has rich reserves of new game products and IP, which is expected to maintain rapid growth of performance. We predict that the company's revenue in 22-24 years will be 3.236/38.48/4.218 billion yuan respectively, and the net profit attributable to the parent company will be 6.99/8.61/1 billion yuan. The PE corresponding to the closing price on April 29 will be 14 / 11 / 10 times respectively, maintaining the "buy" rating.

Risk warning: the risk that the performance of new products is less than expected; Risk of change of actual controller; Industry policy and regulatory risks.

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