Event: according to the company's half-yearly report for 2021, 2021H1 achieved an operating income of 1.094 billion yuan (YoY+11.64%) and a net profit of 134 million yuan (YoY+21.10%). 2020Q2 realized operating income of 540 million yuan (YoY+10.5%,QoQ-2.5%) and net profit of 70.47 million yuan (YoY+27.5%,QoQ+11.2%) in a single quarter.
The company's performance is basically in line with expectations, and the level of profit margin has improved. 2021H1 sales expense rate 24.3% (YoY-2pct); management expense rate 11.6% (YoY+1.3pct), mainly due to business recovery after the 2021 epidemic, the number of employees increased from 801 in the first half of 2020 to 876 in the first half of 2021, resulting in an increase in labor costs; company gross profit margin (YoY+2.6pct), net profit margin 12.4% (YoY+1.3pct).
High-quality content to consolidate the moat, and byte beat to increase cooperation. At present, the company has about 500000 volumes of digital reading content, and continues to add original content to fully establish content barriers. The company's all-free reading APP "get room" 2021H1 has a revenue of 84.47 million yuan and a net profit of 2.444 million yuan, compared with a loss of 10.045 million yuan in the same period last year. The company cooperates deeply with byte jump, and the related transactions generated by 2021H1 include copyright distribution of 62.38 million yuan, promotion of 62.49 million yuan, and commercialization of advertising of 54.96 million yuan. It is estimated that there will be 430 million yuan of related transactions with bytes in 2021, including 160 million yuan of copyright distribution, 120 million yuan of promotion and 150 million yuan of advertising commercialization.
Focus on the layout of short dramas and animation to strengthen the advantages of copyright content. In terms of short plays, the company has invested in short video drama production companies, and five short plays adapted from the company's IP have been launched on Douyin. In terms of animation, the second season of the animated film "Yuanlong", originally adapted by the company, is a hot search in Bilibili Inc., and it is expected that more than 10 animated works adapted by the company's IP will be launched every year.
Overseas business is growing strongly, with more than 1 million new paying users. The business model of overseas reading business is to directly access local authors and works, and to obtain users through Internet channels such as Facebook Inc and Google. At present, the overseas edition of novel reading APP iReader has covered more than 150 countries and regions around the world, the number of overseas high-quality authors has exceeded 5000, the number of original works has exceeded 8000, and the overseas business of 2021H1 has added more than 1 million paying users and revenue has reached 148 million yuan, an increase of more than 100% over the same period last year.
Investment suggestion: the company actively arranges the free reading business, and there is much room for the development of advertising and copyright business in the future.
The company's free business is in a period of rapid growth, and it is expected that the investment will be increased in the short term, and the promotion costs and expenses are expected to increase, so the company's profit forecast is lowered, and the company's net profit is expected to achieve 290,000,000 yuan in 2022, corresponding to PE33X/24X, maintaining the "overweight" rating.
Risk hints: increased competition in the industry; less-than-expected advertising growth; policy regulatory risks
