\u3000\u3000 Perfect World Co.Ltd(002624) (002624)
Company dynamics
The company announced the performance forecast for 2021, and it is expected to realize a net profit attributable to the parent company of 350-390 million yuan, a year-on-year decrease of 77.4% – 74.81%; It is estimated that the net profit attributable to the parent company after deducting non-profit is RMB 100-120 million, a year-on-year decrease of 90.42% – 88.50%.
Event comments
The game business is in the transition period, and the performance is under pressure at different stages
In 21 years, the company’s game business is expected to achieve a profit of 670 million yuan to 690 million yuan, a year-on-year decrease of about 70% compared with 20 years. From the product side, the revenue of the company’s end game products is generally flat, and some mobile games that have been online for a long time naturally weaken with the life cycle. In terms of new products in the past 21 years, the company has launched a total of 5 novice tours in the past 21 years, of which the volume of “extraordinary heroes save the world” and “old legends” is relatively small; At the initial stage of the launch of Ares relic, the marketing expenditure was large, while the water flow in China was less than expected, which reduced the performance of the game business; From its launch in June to the end of the year, dreamy new immortal has contributed nearly 1.6 billion yuan, but the performance of Q4 has dropped; Magic tower was launched on December 16, with more than 10 million new users in the first month and nearly 500 million yuan of water in the first month. The initial performance was excellent. However, due to the mismatch of cost and income, it led to a certain loss at the statement level in 2021. In addition, the company shut down the North American project “magic Legends” in 2021q2, which also caused some losses. During the transformation period, the company explored several game categories, streamlined and optimized some projects and teams that were less consistent with the company’s future development direction, resulting in a certain one-time personnel optimization cost.
The film and television business actively pushed in the inventory, and the global film single investment led to non recurring losses
In 2021, the company broadcast a total of 14 film and television dramas, of which more than half were stock dramas. On the one hand, the company actively promotes inventory work, on the other hand, new startup projects focus on platform customized dramas, ensuring the certainty of revenue. In 2016, the company’s fund signed a single film investment agreement with Universal Pictures. In 2021, due to the repeated global epidemic, the income of some film projects was lower than expected, resulting in the decline of fair value and the reduction of net profit attributable to the parent company in the current period by about 260 million yuan. At present, the single investment of universal films is nearing the end, and only two of the total investment of about 50 films have not yet been released. Excluding the impact of single film investment, the company’s film and television business achieved a profit of RMB 70-90 million.
The youth strategy has achieved initial success, and we pay attention to the progress of subsequent new projects
We believe that the company’s younger transformation has achieved initial success. With the launch of magic tower, in this short period of more than one month, more than ten million secondary players came into contact with the game and learned about Perfect World Co.Ltd(002624) the company through the game. On the one hand, the company can reap considerable profit increment through the continuous operation of magic tower. On the other hand, the company has also accumulated valuable experience on how to reach and operate young user groups. The company’s subsequent products about to enter the testing period and online period include “Tianlong Babu 2”, “one punch Superman: the world”, “codename: X”, “King Arthur million”, “the kingdom of morning and night” and “black cat anecdote society”, many of which are secondary products. If the release of version number is resumed, the company’s rich product reserves are expected to provide strong support for future performance. In addition, the company is also steadily promoting its globalization strategy. The magic tower is expected to launch an overseas version in mid-2022 and plans to be released simultaneously around the world; In terms of themes, games such as one punch Superman: the world are more suitable for global distribution than the company’s previous products.
Profit forecast
The company’s game business has a solid technical accumulation, its products are highly competitive in the field of MMORPG, and the expansion of new categories is effective. If the release of the version number is resumed, many of the company’s games under research are expected to be launched successively within the year, and there is a broad space for future performance growth. The net profit attributable to shareholders of the parent company from 2021 to 2023 was reduced to 372 million yuan, 1.724 billion yuan and 2.489 billion yuan, with EPS of 0.19 yuan, 0.89 yuan and 1.28 yuan respectively, corresponding to 72.29, 15.61 and 10.81 times of PE. Maintain the “buy” rating.
Risk tips
The launch time of games and film and television products is delayed; Industry competition is further intensified; The performance of new products is less than expected; Policy risk; Asset impairment risk
