Sanqi Mutual Entertainment (002555): High income growth but short-term storage pressure on sales costs Expect major works to mature profits
Event 1) The company released its 2018 annual report and achieved operating income of 76.
33 ppm, an increase 佛山桑拿网 of 23 in ten years.
33%; Attributable net profit 10.
09 billion, down 37 a year.
77%; attributable non-net profit4.
$ 7.5 billion fell 54.
7%; non-GAAP adjusted attributable net profit.
10,000 yuan, an increase of 6 in ten years.
Performance is in line with expectations.
2) The company released the first quarter report of 2019, and the operating income was 32.
470,000 yuan, an increase of 95 in ten years.
46%; Attributable net profit 4.
54 ppm, an increase of 10 in ten years.
8%; attributable non-net profit 4.
17 ppm, a six-year increase of 6.
Performance is in line with expectations.
3) The company expects a net profit range of 9 in the first half of 2019.
00 ppm, an increase of 12 in ten years.
31% to 24.
Brief Comment 1. The performance is in line with expectations; explosive funds promote high revenue growth, and high marketing expenses during the expenditure period lead to pressure on short-term net profits.
33 ppm, an increase of 23 in ten years.
Benefiting from the launch of two new games, “One Pass” and “Doulau”, the company’s operating income in the first quarter of 2019 was 32.
47 million, a year-on-year growth rate of 95.
In terms of business, in 2018, mobile game operating income increased by 70%.
0%, is the first to drive higher initial revenue, mobile games business flow86.
8.3 billion US dollars, an annual growth rate of over 85%, the domestic mobile game market share increased to 6.
48%; web game revenue 16.
4.6 billion, affected by the shift of user trends to mobile terminals and the decline in the number of page games products, each decline of 28.
4%; assets related to auto parts have been divested during the year.
2) Gross profit and gross profit margin: With the development of self-developed products, the company’s gross profit margin tends to increase, reaching 87 in the first quarter of 2019.
7%, an increase of 16 per year.
1pct, an increase of 9 from the previous month.
In terms of business, the gross profit and gross profit margin of the mobile game business were the highest again, with a gross profit margin of 81 in 2018.
0%, further improvement of 4 per year.
5pc; the gross profit of web games tends to decline, but the gross profit margin further increases 5.
0pct to 71.
3) Periodic cost and expense ratio: Affected by the launch of new products, a series of major works such as “Lost City of Ghost Speaking”, “Sword of the Archangel H5”, “Awakening of the Immortal”, “Breaking Dragon” and other major works are still among the mainDuring the promotion period, the company’s sales expense rate rose sharply. In the first quarter of 2019, two more popular works during the promotion period, “One Pass” and “Duro Continental H5” were added. At that time, the sales rate reached 66.
0% historical high.
Due to the rapid growth of the income end, the comprehensive management expense rate including R & D expenses under a unified caliber has tended to decline, and the company has continued to grow in R & D. In 2018, R & D expenses continued to increase23.
Overall control of financial expenses is better.
4) Net profit: In 2018, due to the company’s performance commitments in Shanghai Mojing failed to meet the standards, the company confirmed that it had confirmed relevant performance compensation gains and goodwill impairment losses. The impact on the attributable net profit in 2018 was approximately -5.
In addition, in 2018, the company had no significant equity disposal gains. (In 2017, due to the disposal of equity of companies such as Shanghai Yuanyuan and Shanghai Aurora, the after-tax investment income was recognized2.
Mainly due to the significant increase in selling expenses, the company’s net profit attributable to the company increased by 10 in the first quarter.
8%, the growth rate is significantly lower than the income side.
It is expected that in the future, the game will gradually develop into a mature period, and marketing-related expenses will gradually decrease, and profit release will be gradually realized.
5) Operating cash flow: The company’s net operating cash flow for the first quarter of 2019 was 1.
US $ 5.8 billion. Previously, the average chain rate fell. First, the increase in Internet traffic costs led to higher operating cash flows.
6) Performance indicator: Estimated net profit range for the first half of 20199.
00 ppm, an increase of 12 in ten years.
31% to 24.
78%; corresponding to 2Q19 attributable net profit range 4.
460,000 yuan, an increase of 13 in ten years.
Compared with the weak profit growth rate in the first quarter, the profit release of explosive products is expected to gradually be realized in the second quarter.
2. Strengthen the strength of independent research and development, and enhance the strength of multi-category game research and development. Since 2018, the company has newly launched more than 10 mobile games since its research, and the mobile game R & D business has increased by 61.
05%, the proportion of self-developed mobile games continued to increase.
In the first quarter of 2019, the company’s self-developed “Doulau Continental” H5 and “One Passed” were outstanding, forming a good support for the strong growth of the revenue side.
In 2019, the company’s casual sports game “Super Ball (tentative name)”, turn-based game “Mobile Game Project AOD”, and simulation business game “Code G” are expected to be launched, and the rest are in the mobile gameIt also includes “Legend NB”, “Codename YZD”, “Legend”, “Codename DG”, “Dark Descendants”, “Elven Ceremony”, etc., totaling more than ten models, self-developed product categories continue to develop.
3. Domestic market share of domestic distribution business is increasing, and overseas is expected to contribute incremental space. The company adopts a new strategy of “three-dimensional marketing + precision promotion + long-term service” systemic traffic management.Has its own advantages.
In terms of three-dimensional marketing, the company; in terms of precision promotion, the company has accumulated user resources and big data for many years to improve the effectiveness of targeted advertising; in terms of long-term user services, the company combines rich product supply to provide players with a more comprehensiveOne-stop service to continuously improve player satisfaction, activity and retention, and improve user life cycle.
1) Domestic mobile game distribution market: The company’s game distribution categories tend to diversify. In addition to strengthening self-developed products, it also cooperates with high-quality manufacturers such as Tencent, Netease, Perfect World, and Century Huatong, as well as strategic cooperation through investment and stock ownershipAnd other ways to deepen the supply of quality game content.
The company’s issued business product reserves cover ARPG, MMO, card, SLG and other types, involving different alternatives such as fantasy, Eastern and Western fantasy, adventure, cultivating, and two-dimensional.
In 2018, the company’s domestic mobile game publishing business market share further increased to 6.
There are more than 5 products with monthly sales of more than 100 million products issued since 2018, and the highest monthly sales tray reaches 9.
More than 300 million, with a total of more than 1.
100 million people, with a maximum monthly active users of more than 20 million, and diversified business strategies have achieved initial results.
Up to now, the company’s domestic mobile game products have been reserved for the mobile game “Sword and Reincarnation”, “Pig and Dungeon”, “Fairy 2 (tentative name)” and other self-developed products “Super Energy””Ball” ball (tentative name), “Codename YZD”, “Legend”, “Elven Ceremony” and so on.
2) Overseas mobile game distribution market: Combining self-developed and agency products of diversified categories, the company has achieved breakthroughs in Japan, South Korea, and other regions while maintaining the competitive advantages of Hong Kong, Macao, and Taiwan and Southeast Asian markets.
Among them, “Age of Eternity” was launched in Japan at the end of June 2018 and has a monthly flow of more than 10 million. In addition, mobile game products in the Korean market have also achieved a strategic flow of more than 10 million and the top 10 games best-selling results.
As of the end of 2018, the company’s overseas game distribution has covered more than 200 countries and regions around the world, and nearly 80 mobile games have been released worldwide.
As of now, the company’s reserve products include: ① “Code MH”, “Code ZSJ”, etc. for the global SLG market; ② SNK card games for the Japanese market, women’s games “Cygnus”, and the two-dimensional game “Devil King Project””; ③ The two-dimensional game” Shock Library: Zero Realm “for the Korean market, SLG game” True Dragon Domination “, ARPG game” Dark Descendants “, etc .; ④ Other games include” Soul Sister: Legend of the Moon Beside “,” DoulaContinental “,” Hope M “, etc.
3) Domestic page game issuance market: In 2018, the company’s internal page game market gradually increased the number of open services to nearly 36,000 groups, ranking first in the 9k9k service list and maintaining its leading position in the industry.
The outstanding products launched by leading companies also include “Tai Chi Rise”, “Town Magic” and “Destroyer”. The “Legend of Domination” and “Angel Sword”, which have been on the line for four years, have been launched on the 2018 page tour.The list is ranked 4th and 7th, which forms a better support for revenue.
In 2019, the company is expected to launch a page research product “Miracle X (tentative name)” and an agent page game product “Swordsman (tentative name)”.
4. Improving the layout of the cultural and creative industries and advancing the platform strategy The company continues to improve the layout of the cultural and creative industry chain by investing in stocks and other methods, actively exploring high-growth cultural and creative cross-cutting areas, covering games, film and television, animation, music, literature, VR / AR, Internet health, Internet education and other cultural consumption areas, so as to continuously expand the coverage of the population, especially the coverage of young people.
Achievements, the company’s supplementary investment areas include Awakening Yoga (Internet Sports), Miao Xiaocheng and KaDa Stories (Children’s Education), Jimu (Youth Culture and Social), Yuanji Painting (Artist Broker), Jinhai Shiyi (IP Incubation)).
The company’s other invested projects also include games (Shenzhen Zen Tour, Zilong Interactive Entertainment, Heartbeat Network, Chengdu Fighting, etc.), film and television music (Youying Culture, Zhonghui Television, Fenghua Qiushi, etc.), and animation (excellent culture, artPainting Kaitian, play can play, etc.) and VR (Archiact, Shanghai Tianshe Culture) and so on.
5. In the short term of profit forecasting and investment advice, titles such as “One Blade” and “Douluo H5” are still in the distribution period, and sales costs are expected to remain close to the level, but after entering the profit release period, they are expected to contribute significantly to the flexibility of contribution.
A variety of products with monthly sales of over one hundred million yuan proves the company’s outstanding research and transportation strength in launching explosive products, diversified 北京夜网 product layout and more corrective steps to the sea also provide the company with higher medium and long-term development space.
Maintain 2019 / 20E net profit forecast18.
500 million / 21.
2 trillion, the current market value corresponds to 2019 / 20E P / E ratio of 15.
7 times / 13.
5x, continue to recommend.
6. Risk reminder: The increase in traffic expenses is higher than expected, the existing head product flow is less than expected, the performance of new products on the market is lower than expected, and policy supervision is becoming severe.