\u3000\u3 China Vanke Co.Ltd(000002) 517 Kingnet Network Co.Ltd(002517) )
The company issued the annual report of 2021 and the first quarter report of 2022. In 2021, the operating revenue was 2.375 billion yuan, an increase of 53.92% year-on-year; The net profit attributable to the parent company was 577 million yuan, a year-on-year increase of 224.14%; The net profit attributable to the parent company after deducting non-profit was 501 million yuan, with a year-on-year increase of 393.96%. In the first quarter of 2022, the operating revenue was 1.029 billion yuan, an increase of 129.73% year-on-year; The net profit attributable to the parent company was 248 million yuan, a year-on-year increase of 66.66%; The net profit attributable to the parent company after deduction was 241 million yuan, an increase of 256.25% year-on-year.
Key investment points:
While the performance of operational products is stable, the performance of online new products is good, which promotes the significant growth of the company’s performance. The substantial growth of the company’s performance in 2021 and 2022q1 mainly comes from two aspects: on the one hand, the company continues to maintain a relatively good revenue and profit contribution in 2021 in the games such as “original legend”, “Legend of the king” and “high-energy hand group”; On the other hand, a number of new online games such as “hot blood strike”, “swordsman in Black: trump card” and “Legend of demon heroes” performed well in 2021, which promoted the significant growth of the company’s revenue and profits.
Stick to the advantages of legendary IP category and expand to diversified product matrix at the same time. In terms of game products of legend category, the company has rich experience in R & D and operation. Since its launch, the star page game product “Legend of blue moon” has accumulated more than 4 billion yuan, which is one of the most successful page game products in the market. In January 2021, the mobile game “Legend of blue moon 2” entered the top 50 of IOS bestseller list after it was launched. At present, the company operates legendary games, including blue moon products such as blue moon legend and Blue Moon Legend 2, and games such as legend of the king, primitive legend and hot blood. In addition to the legendary products, the company has developed game products such as swordsman in Black: trump card, legend of demon hero and dare to fight against each other, and explored a richer and diversified game product matrix of MMORPG, cards, real-time combat and other categories.
In the distribution line, the company’s XY distribution platform has been put into operation. So far, it has launched more than 100 high-quality games, among which many games such as “Legend of demon heroes”, “high-energy hand group”, “zero front” and “Legend of the blue moon” have performed well. Since the launch of the self-developed spontaneous product “Legend of demon heroes”, it has won the seventh place in the best-selling list, and “zero front” ranked first in the IOS free list on the first day of its launch.
While the income increases, the expenses decrease significantly, and the investment income also contributes to the net profit. In 2021, while the company achieved obvious growth in operating revenue, the promotion cost decreased by 22.18% year-on-year, the management expense decreased by 10.92% year-on-year, and the R & D expense increased by 8.27% year-on-year. In terms of expense rate, the sales expense rate, management expense rate and R & D expense rate in 2021 were 15.18% / 6.96% / 14.28% respectively, with a year-on-year decrease of 14.85pct/5.07pct/6.03pct respectively. In addition, the company sold 20% equity of Hangzhou Tengmu Network Technology Co., Ltd. and 25% equity of Hangzhou xinguangliumei Network Technology Co., Ltd., which brought more investment income and made a positive contribution to the net profit. The investment income of the company in 2021 was 105 million yuan.
Looking forward to the future, the company has rich products. In 2022, the company’s new products include “xuanzhongji” and “battle of angels”. The products planned to be launched include “journey to the west of the eight dragon gods”, “new story of relying on heaven to kill dragon”, “Legend of fairy sword and Chivalry: a new beginning” and other products.
According to the company’s annual report, at present, products such as mountain and sea floating dream record, code: rebirth, code: martial arts, projectd and globalization project projecto have entered the middle or final stage of development. In addition, many projects such as “farming life after returning to the deep clouds” and “code name: Exploration” are continuously promoted in the initial stage of development. In terms of distribution business, in terms of heavy game IP products, we will continue to give full play to the advantages of legendary products and expand the flow scale; In terms of IP adaptation of medium and mild games, it focuses on the emotional IP of the Post-70s / 80s; Literature, film and television, animation IP adaptation products are also being developed and polished; In addition, all kinds of original IP products are also continuously promoted.
Investment advice and profit forecast: focusing on the core game business, the company has established three business segments of “self research, issuance and investment + IP”. At the R & D end, while consolidating the advantages of legendary products, we will increase the exploration of diversified categories and form a rich product matrix; At the distribution end, gradually improve the internal and external combined distribution system through its own distribution team and cooperation with external distribution teams; Investment + IP terminal, while promoting the strategic investment enterprises to form strong business synergy with the company’s issuance business, actively accumulate all kinds of IP, provide IP support for the company’s R & D system and enable the rapid development of investment enterprises. The continuously enhanced R & D capability and richer game product matrix are expected to continue to drive the company’s performance growth. It is estimated that the company’s EPS from 2022 to 2023 will be 0.32 yuan and 0.40 yuan. According to the closing price of 4.52 yuan on April 29, it will be covered for the first time and given an “overweight” investment rating.
Risk warning: there is uncertainty in the number and rhythm of version number distribution; The product flow is less than expected; The flow of legendary products fell more than expected; Risk of core personnel turnover; Intensified market competition
