Incident: Xinghui Entertainment (300043) released an interim report after the market on August 28. The 2022 H1 company achieved operating income of 777 million yuan, an increase of 46.72% over the previous year; net profit of -136.33,300 yuan, a year-on-year decrease of 93.09%; after deducting -21.1994 million yuan from non-return mother, losses narrowed 89.54% year on year, mainly due to a sharp recovery in the soccer club business (YOY +350.11%).
Comment:
The company's losses narrowed sharply year over year. After splitting, 2022Q2's total revenue for the single quarter was 408 million yuan, YOY +63.19%, qoq +10.47%; QOQ +23.39%; Q2 net profit for the single quarter was -4.1029 million yuan, yoy +96.54%, qoq +56.95%; Q2 net profit after deducting net profit for the single quarter was -9.1957 million yuan, YOY +92.32%, qoq +23.39%.
The company's self-developed mobile game “Battlefield Without Borders” was issued in July. 22H1's game business achieved revenue of 239 million yuan, a year-on-year decrease of 14.35%. Among them, domestic game revenue was 97 million yuan, a year-on-year decrease of 25.12%. This is because game products were unable to obtain version numbers as originally planned, causing delays in game launch time. In April '22, the State Administration of Press and Publication restarted issuing domestic online game editions. The company developed its own ancient historical strategy mobile game “Battlefield Without Borders” and obtained a version number in July. Two other game products have passed the final review of the General Administration and are yet to be approved.
The game business focuses on IP resource reserves. The company is rich in IP resources, including licensing more than 20 IP titles such as “The Legend of Heroes of the Three Kingdoms”, “Dream Night of Sheng Tang”, “The Legend of Lu Ding”, and “Adventure Island”, and has complete intellectual property rights for quality games such as “The Age of Blue.” This year, the original animated series “Dragon Warriors 3: Thunderstorm” by Superstar Pictures, a subsidiary of Guangzhou Junhao Hongfeng Network Technology Co., Ltd., launched on Tencent Video in May; the original animation “Dream Mountain and Sea Song” produced by Guangzhou Yuntu Animation Design Co., Ltd., the company's shareholding company Guangzhou Yuntu Animation Design Co., Ltd. also went live on Tencent Video in July.
The company's holding team, Club Espanyol, returned to La Liga, and revenue from television broadcasting rights increased.
The company has now acquired 99.59% of the Spanish Football Club's shares, making it the first A-share listed company to hold top clubs in the five major European leagues. 22H1's soccer club business achieved revenue of 323 million yuan, an increase of 350.11% over the previous year, accounting for 41.56% of total operating income; net profit of -63.7622 million yuan. Among them, TV broadcasting rights revenue was 196 million yuan, an increase of 564.21% over the previous year, due to the team's return to La Liga after experiencing relegation to the La Liga League. The team's competitive strength increased, and in the 24th round of the league, they drew against the veteran team Barcelona.
The toy business expands IP licensing categories and promotes product technology innovation. On 22H1, the company's toys and derivatives business achieved main business revenue of 169 million yuan, an increase of 28.32% over the previous year, accounting for 21.72% of total operating income; realized net profit of 13.9577 million yuan, an increase of 125.32% over the same period last year. The company's toy business mainly focuses on research and development of car models, robots, baby toys, and building block assembly. In total, more than 400 high-quality toy products have been exported to more than 120 countries and regions. In total, it has been authorized by more than 35 world-renowned car companies, and has been the only global licensor for BMW's dynamic car models and children's bicycle series products for ten consecutive years. This year, the company added licenses for Hummer EV pickups, McLaren F1 racing cars, Maserati MC20 sports cars, etc., to continuously enrich the company's authorized brands and categories and enhance the core competitiveness of the toy business.
Investment advice: With the return of the company's holding team Club Español to La Liga, the club's revenue from television broadcasting rights, sponsorship advertisements, ticket memberships, soccer derivatives, etc. improved dramatically; in terms of the game business, the domestic rookie game “Battlefield Without Borders” received a version number. Follow the game's launch process, and it is recommended to pay close attention.
Risk factors: risk of game business falling short of expectations in the future, risk of injury or illness of soccer club players, risk of changes in foreign exchange rates