Event

(1) the company released its annual report on March 28, 2017, with revenue of 394 million yuan in 2016, an increase of 103.72% over the same period last year, and a net profit of 78.83 million yuan belonging to shareholders of listed companies, an increase of 512.76% over the same period last year. (2) from January to March 2017, the company expects net profit to range from 28.5 million yuan to 30.2 million yuan, an increase of 724% to 774% over the same period last year.

Brief comment

In 2016, the positioning of "leading mobile Internet enterprises" was clearly defined, business carding and personnel reductions were carried out, and the fundamentals were reversed. In 2016, the company revolves around "leading mobile Internet enterprises"

Positioning, comprehensively sort out the business, adjust the strategic focus, optimize the personnel structure, and finally achieve a comprehensive recovery of various businesses, business revenue and profits have reached a new high since the establishment of the company. At present, the company's main business sectors include: mobile value-added services, mobile game distribution, virtual operator services, mobile Internet aviation, mobile Internet industry base and so on.

Among them, the revenue of mobile value-added services reached 116 million for the whole year, up 17.54% from the same period last year, and the gross profit margin increased by 11.82% over the same period last year. Mobile game distribution business, stopped self-research mobile game projects with high investment and poor performance, focused on the distribution agency work of international mobile games, and positioned itself as a high-quality IP boutique game publisher. The company reached a number of mobile game cooperation with international well-known mobile game production companies such as EA, Rivio, King, etc., mainly relying on the distribution and operation of four overseas boutique IP mobile games, achieving 8160 million revenue for the whole year, an increase of 32.54% over the same period last year. Gross profit margin increased by 11.89% over the same period last year The revenue of other mobile Internet industry applications (including backward traffic operation, WiFi resale, mobile Internet aviation) was 165 million yuan, an increase of 438.37% over the same period last year, and the gross profit margin was 7.07% higher than the same period last year. As a result of team optimization and efficiency improvement, the company's expense rate has dropped significantly, with annual sales expenses falling by 18.59%, administrative expenses by 14.94%, and financial expenses by 351.57%.

The performance increased rapidly in the first quarter of 2017, and the company is expected to maintain high growth in the next two years, driven by mobile game distribution business and mobile Internet application business. From January to March 2017, the company expects net profit to range from 28.5 million yuan to 30.2 million yuan, an increase of 724% to 774% over the same period last year. In the first quarter, it is affected by factors such as double salary at the end of the year, bonus and restricted stock expense amortization. Therefore, normally, the net interest rate will be higher in the next three quarters. In 2017, the company plans to expand the scope of cooperation among international game companies and continue to dig up boutique IP. It is expected that more than a dozen boutique mobile games will be introduced and issued, and the revenue and profits of mobile games will continue to increase significantly. The possibility of in-depth cooperation with overseas well-known enterprises for the joint development of classic IP in the future cannot be ruled out.

It is proposed to invest in the establishment of a mobile Internet industry M & A fund, invest in areas related to the Internet of things, layout Internet lottery products, and cultivate new performance growth points. In the traditional business recovery and high growth at the same time, the company also continues to cultivate new performance growth points through foreign investment. In April 2016, the company announced that it plans to set up a merger and acquisition fund to invest in new technologies in the next generation of emerging industries, especially in the field of the Internet of things, to seek a combination with the existing three major businesses, and to cultivate new performance growth points with a fund size of 500 million yuan.

On March 14, the company announced that it invested 21.3158 million yuan to subscribe for a 27% stake in Tianyu Jingwei, laying out the UAV field as a terminal for information transmission and collection in the era of the Internet of things. At the same time, the company's holding subsidiary, National Star Lottery, has been laying out lottery services, actively storing related products and technologies, and waiting for the Internet lottery policy to be liberalized.

Investment suggestion

After strategic adjustment and personnel optimization in 2016, the company achieved a reversal of performance and fundamental recovery, and it is expected that the business of mobile games, virtual operators and Internet Industrial Park will continue to maintain high growth in 2017. At the same time, the company has been working hard to cultivate new performance growth points for the next generation of emerging industries, especially the investment layout in the field of the Internet of things, which is closely integrated with the existing business. It is expected that the company's net profit from 2017 to 2018 will reach 152 million and 195 million, with a 6-month target price of 30.23 yuan. Please pay close attention to it and give it a "buy" rating.

Risk hint

1. Mobile value-added services, traffic operation services, WiFi resale services and enterprise short message services may be affected by operator policies. Gross profit margin decline risk 2. The newly introduced mobile game operation data does not meet the expected risk.