Forecast 1H22's net loss of about 70 million to 80 million yuan
The company issued a profit warning, forecasting that 1H22's operating income was about 80,085 million yuan (833 million yuan in the same period last year) and a net loss of about 70 million yuan (130 million yuan in the same period last year). We judge, mainly because the new tour "Ling Yunnuo" online focus on marketing promotion and the group's overall brand marketing upgrade caused by the relative pressure on the profit end.
Pay attention to the main points
"Ling Yunnuo" new online performance is stable, the proportion of own channels to increase the level of gross profit margin. In January 2022, the company launched a new generation of women's antique mobile game "Ling Yunuo". According to Qimai data, the product ranked 58th in terms of daily average sales of iOS games in China in the first half of the year, with an overall stable performance. In terms of stock games, the head game "floating Life for Qing Song" ranks 42nd on the daily best-seller list of iOS games (1H21 28th on the daily average), and the game running water drops naturally. We judge that the company's 1H22 revenue is basically the same as the same period last year, about 830 million yuan. In terms of gross margin, according to the company's announcement that 1H22 achieved a gross profit of 560 million yuan to 5.8 million yuan, we believe that the company's gross profit margin level increased slightly in the first half of the year, mainly due to the increase in the proportion of "Lingyunuo" own channels, and the corresponding reduction in channel expenses.
The marketing investment of the new tour has been increased, and the R & D construction has continued. In terms of marketing investment, the company said that 1H22 marketing expenditure increased by about 180 million yuan compared with the same period last year. We judge that it is mainly due to the concentration of marketing in the initial stage of the launch of the new tour "Lingyunuo"; at the same time, the upgrading of the group's overall brand marketing also produces related expenses. According to DataEye, Lingyunuo ranked first in the amount of material that women bought and put into the game in the first half of this year.
We expect the company's 1H22 sales expenses to increase 67% year-on-year to 470 million yuan. In the part of R & D investment, we expect 1H22 R & D expenditure to reach 170 million yuan, and the R & D expenditure rate remains stable at 20% level, maintaining steady R & D investment; for the whole year, we expect the volume of R & D investment to be basically the same as the same period last year.
The new tour may gradually release profits, and the testing of new products will be carried out in an orderly manner. Looking forward to the second half of the year and next year: in terms of camp games, "Lingyunuo" is gradually entering a stable period, with the relative reduction of buying volume, the second half of the year is expected to continue to contribute individual profits. In terms of reserve games, the company conducted a test of "du Lala's Promotion" in July this year, and has a series of games for women, such as "code name: FS2". We expect that with the development and testing, the product is expected to be launched in the relatively mature stage, or it will become the next generation of women in the company to promote the growth of the classic works, but the main positive contribution to profits is expected to be next year.
Profit forecast and valuation
In view of the fact that the launch progress of the game is lower than we expected and the marketing investment is higher than expected, the net profit of 2022 Universe in 2023 will be reduced by 85% to RMB 0.55 million, and the corresponding transaction will be traded in 2022 Universe in 2023. The net profit of 2023 will be reduced by 85% to RMB 0.55 million. Maintain the outperform industry rating, taking into account the impact of the company's product cycle, switch to 2023 valuation, due to the adjustment of earnings forecasts and the downward shift of the industry valuation center, the target price is reduced by 28% to HK $1.6, corresponding to 10 times Phand E in 2023, with 37% upside space.
Risk
Macroeconomic impact on entertainment consumption expenditure; industry regulatory policy risks; game launch progress or pipeline performance is not as expected; liquidity risk.