Event: the company released its 2016 annual report, with operating income of 1.647 billion yuan, an increase of 152.62% over the same period last year, and net profit of 52.8117 million yuan, down 69.53% from the same period last year. The profit distribution scheme is 0.25 yuan (including tax) for every 10 shares.
The traditional video business has grown steadily, and the income of VIP members has increased significantly. In 2016, Storm TV achieved business revenue of 930 million yuan, an increase of 644% over the same period last year, and advertising revenue of 580 million yuan, an increase of 25.22% over the same period last year. VR marketing income of 15.8928 million yuan, achieving a breakthrough in commercial realization of advertising in the domestic VR industry from zero to one. In 2017, based on the existing content resources, the company will further consolidate the content foundation, cover film, TV series, variety shows, animation and other fields through copyright procurement and foreign cooperation, so as to enhance the content support of the company's existing business platforms.
VR business is in an absolute advantage, maintaining rapid growth. In 2016, Storm Mirror further consolidated its absolute lead in the VR industry, with cumulative sales of more than 2 million units, users for 35 minutes, and a share of 88% in JD.com, making it the number one in the domestic VR industry. Storm Mirror has made hardware profits in 2016 and will significantly increase sales of high-end products with high gross margins in 2017. At the same time, through the development of VR marketing, VR advertising and VR game business, to improve the charging power of VR business users, VR business is expected to achieve profitability in 2018.
The sales volume of TV business has increased significantly and achieved a leading position in the industry. In 2016, Storm TV sold about 800000 units, with sales revenue reaching 930 million yuan, an increase of 644 percent over the same period last year, making it the fastest growing and most efficient Internet TV brand in the Internet TV industry. The average user charge (ARPU value) of Storm TV increased from 8 yuan in the first quarter to 80 yuan in the fourth quarter, with an annual average ARPU of 61 yuan. The cost of getting customers per user is about 400 yuan, which is much lower than the industry average. In the next three years, Storm TV will reduce customer costs and increase average user charges by adding a variety of large-screen marketing methods and user charging systems, and is expected to achieve profitability of the TV business in 2019.
Give "overweight" investment rating. In 2016, while continuing to maintain the business development of PC and mobile video platform, the company completed the construction of two new platforms, VR and TV. The new platform will enter a period of scale development in 2017, reaching a profit inflection point by reducing customer acquisition costs and increasing ARPU values. The newly established sports business is developing at a high speed and has huge room for growth. The company is given a profit forecast of 0.18,0.23,0.26 yuan from 2017 to 2019, corresponding to 197,160,140x PE, and given an investment rating of "increasing holdings".
Risk hint. Competition in the Internet industry aggravates the risk, and the new business falls short of the expected risk.