The company issued an earnings warning with an estimated 21-year adjusted net profit of RMB 2.2-240 million RMB. After the close of the market last Friday, it is expected that the company will record an adjusted net loss of RMB 2.2-240 million yuan, mainly due to (1) the launch time of "Noah's Heart" and "Project Code: Sigmar" has been delayed from 21 years to 22 years due to market environment and product optimization. (2) the performance of "Dream New World" launched in 21 years is lower than expected; (3) the expansion of R & D team and the corresponding increase in staff welfare expenditure, as well as the increase in outsourced technical services; and (4) the self-issued "under the map" has been launched in many countries and regions one after another, and is in the stage of investment and growth, resulting in an increase in promotion and advertising expenditure.
It is expected that four games worth looking forward to will be launched this year, and four games are expected to be launched this year, including (1) MMORPG masterpiece "Heart of Noah", which has conducted three closed tests and is conducting a second paid test. At present, the test feedback is good, it is expected to be launched in 2Q22, the domestic version has been obtained and will be released solely by Tencent, and will be released independently overseas. (2) the MMORPG+ shooting game "AVATAR:Reckoning", which has a well-known IP Avatar blessing, first exploded in January and won praise after its first test in Canada. It plans to be listed overseas this year, and then enter the domestic market. Tencent, the world's top shooter, will be responsible for the global release of the shooting game, which will be the key game this year. (3) the female-themed game "in the name of shining" won market attention after its first explosion in August last year, with exquisite clothing, and gave players a higher degree of freedom to transform their clothes, which is rare in the market. Overseas version testing is being carried out recently and will be released independently at home and abroad. as of early March, the number of TapTap reservations exceeded 1.27 million. (4) the SLG category "project code: Sigmar" has carried out two rounds of Taptap domestic tests, and the results are good. It will be issued overseas first and then domestically. The company is good at MMORPG category games, and through the launch of the 2020 "under the map" to enter the ranks of SLG head manufacturers, used to be known for the development of boutique games, almost every six months to one year can produce a popular style game. Despite the pressure on revenue caused by the lower-than-expected performance of the new trip "Dream New World" and product delays last year, the company is still actively investing and accumulating R & D. If the above four games can be released as scheduled, this year will be the company's product year, which is worth looking forward to. In addition, the company has announced 23 and 24 product lines, and 3 and 4 new games will be launched respectively.
Lower the target price to HK $8.00 and maintain the "overweight" rating
The 21-year revenue is reduced to 1.02 billion yuan, considering that the company still has 11 mobile games in operation, the long-term data is stable, and it will welcome the product year, and the revenue in 22 years is expected to increase 75.9% to 17.9 yuan compared with the same period last year. It is expected to have an adjusted net loss of 220 million yuan in 21 years, and an adjusted net profit of 310 million yuan in 22 years due to the expansion of new games and the expansion of the R & D team. Based on the current peer-to-peer average of 11.1 times 22e PE, the target price is HK $8.00, with a potential increase of 16.8%, maintaining the "overweight" rating. This year, focus on the new online performance, is expected to become a valuation catalyst.
Risk tips: (1) regulatory risks in the industry; (2) the performance of the new game is not as good as expected; (3) overseas issuance is not as expected.