Main points of investment:
Event: on the evening of March 28, Northlatitude released its 2016 annual report. During the reporting period, the company achieved revenue of 394 million, an increase of 103.72% over the same period last year, and a net profit of 78.83 million, an increase of 512.76% over the same period last year. The company's revenue and profits have reached an all-time high in the past 16 years. At the same time, the company plans to pay a cash dividend of 1.10 yuan for every 10 shares to all shareholders and increase 12 shares for every 10 shares to all shareholders with the capital reserve. In addition, the company expects a net profit of about 28.5 million-30.2 million in the first quarter of 2017, a sharp increase of 724% over the same period last year.
The transformation of the mobile Internet has been accelerated, and the existing business has improved in an all-round way. During the reporting period, the company accelerated its transformation to a mobile Internet integrated service provider based on its business and channel advantages accumulated over the years. Traditional mobile value-added services steadily increased by 17.54%; revenue from mobile games focused on boutique mobile games distribution agents increased by 32.54%; and revenue from applications in industries such as traffic operation increased by 164 million, a substantial increase of 438.37%. In addition, the occupancy rate of the north latitude mobile Internet base has reached 70%, and it is expected to continue to contribute stable profits in the future. The Internet lottery business is actively stocked and is currently waiting for the policy to be liberalized. The company's existing business has improved in an all-round way, and its development is stepping into the fast lane.
The cost / expense control is improved obviously, and the equity incentive further stimulates the efficiency of the company. During the reporting period, the company stopped investing in self-research mobile game projects with high and poor performance, and further strengthened cost control and improved the efficiency of the use of funds. In 2016, the company's overall gross profit margin increased by about 5 percentage points. During the period, the total cost decreased by 18.99%, and the operating efficiency improved significantly. At the same time, the company completed the equity incentive plan in December 2016, which will further improve the company's operating efficiency and promote the rapid growth of the company's performance.
The extension layout is accelerated to increase the vitality of long-term development. March 17, the company announced 2131 million shares in Tianyu Jingwei, 27% equity, Tianyu Jingwei as a leading venture enterprise in the field of military drones, excellent qualifications, follow-up development is worth looking forward to; March 27, the company shares 15.89% of the "Qingyou Yile" listing of the new third board, its follow-up investment value is expected to gradually appear. Previously, the company's investment in the "North latitude Ping an Mobile Internet Industry Fund" was selected into the cooperation list of Beijing High-tech Industry Development Fund. The company's advantages and achievements in the extension layout are gradually emerging, which will further increase the company's long-term development vitality.
Maintain a "buy" rating. Considering the overall improvement and growth of the company's business, we estimate that the company's EPS from 2017 to 2018 will be 0.62 yuan and 0.87 yuan respectively. At present, the traditional mobile value-added of the company, as well as the sound operation of the Internet base of Nanjing Industrial Park, and the foundation for performance and growth have been consolidated; with the accelerated development of traffic operation and mobile game business, the liberalization of relevant industry policies and business promotion in extension, the company's performance scale is expected to accelerate growth. It will be given 50 times PE in 2017 with a six-month target price of 31 yuan, maintaining a "buy" rating.
Main risk factors. Emerging business industry policies are lower than expected and systematic valuations fluctuate.