1H22 performance meets the forecast
The company announced 1H22 results: revenue was 826 million yuan, down 0.8% from the same period last year; net loss during the period was 72.96 million yuan, and net profit for the same period last year was 130 million yuan; the performance fell within the previously forecast net loss range of 80,080,000,000 yuan / period net loss.
Trend of development
1H22 revenue is basically the same as the same period last year, and the "Lingyunuo" stream gradually climbed or entered the payback period in 2H22.
The company's 1H22 revenue fell slightly by 0.8% year-on-year / up 5.5% from a month earlier to 826 million yuan. We believe that the external affected by the macro environment, the overall state of the industry, internal by the product cycle, the natural decline in the flow of old products, 1H22 revenue is flat compared with the same period last year. From the product point of view, we believe that in the first half of the year, the new tour "Ling Yunuo" has been built into a new product with high fever for women to the track, and the current flow and ranking are relatively stable, and the climbing period of the product is shorter than that of other women in the past. In the market environment in which women frequently come out of the product in the first half of the year, it highlights the company's strong barriers to the track; old games such as "floating Life for Qing Song" naturally decline. We believe that the new tour "Lingyunuo" is expected to enter the payback period in the second half of this year, the stock of old games will also gradually release profits, the whole year is expected to achieve profit. In terms of gross profit margin, the gross profit margin of the company's 1H22 is 69.3%, which increases 2.1/1.8ppt compared with the previous month. We judge that the proportion of products in iOS and Android channels is gradually balanced, and the proportion of channel share to revenue is slightly optimized.
Due to the change of Xinyou marketing strategy, the early investment is relatively high, and the R & D expenditure rate remains relatively high. The company's 1H22 sales expenses also increased by 67% to 470 million yuan, mainly due to: 1) Lingyunuo was launched at the beginning of the year, the marketing strategy tended to be "hot start", and the sales expenses caused by pre-purchase volume and brand marketing were relatively concentrated in the first half of the year; 2) the company's brand upgrading also had related marketing expenses. In terms of R & D investment, the company's 1H22 R & D expenses have also been reduced by 5% to 170 million yuan; the R & D rate has reached 20%, which is basically stable compared with the same period last year. We judge that the main reason is that the company maintains a core R & D talent reserve and continues to explore and invest in engine technology and other directions.
Women have a rich stock of products and pay attention to the progress of new game testing and the process of globalization. In terms of new products, the company currently has products such as "du Lala Promotion", a female motivational mobile game (a full-platform appointment has been opened and an external test will be conducted in July 2022), and women's flagship mobile game "FS2" (currently in the stage of research and development and testing). In terms of overseas development, in the first half of the year, in the absence of a large number of new trips abroad, the company achieved 209 million yuan in overseas income through the relatively steady operation of overseas versions of old games such as "floating Life for Qing Song" and "Legend of Xi Princess", accounting for 25% of the total income of Prida; in terms of product direction, according to the company's announcement, Lingyunuo is also preparing overseas versions, and some agent products have been tested overseas.
Profit forecast and valuation
Keep the profit forecasts for 2022 and 2023 unchanged. The current share price corresponds to a price-to-earnings ratio of 40.4 / 7.5 times 2023. Maintain an outperform industry rating and a target price of HK $1.60, corresponding to a price-to-earnings ratio of 10.0 times 2023, with 34% upside from the current share price.
Risk
Macroeconomic impact on entertainment consumption expenditure, industry regulatory policy risks, game launch progress or pipeline performance is not as expected, liquidity risk.
