From January to December 2015, the company achieved operating income of 343 million yuan, a year-on-year decrease of 29.9%; realized operating profit of -91 million yuan, a year-on-year decrease of 393.7%; realized net profit attributable to the parent company of 65 million yuan, turning a year-on-year loss into a profit; and basic earnings per share of 0.25 yuan. It is proposed to distribute a cash dividend of 0.2 yuan (tax included) for every 10 shares to all shareholders.
Significant impairment of goodwill dragged down performance: in 2015, the company's operating income fell 29.9% year on year, and the company's traditional online game business revenue fell by 44..05%. Through the sale of shares in Shanghai Jump, the company obtained a certain amount of investment income. However, since the performance promises of the subsidiaries Shanghai Meifeng and Shenzhen Sumo were not fulfilled, the company calculated goodwill impairment of 187 million yuan, which seriously dragged down the company's performance. The company's gross profit margin continued to fall to 43.08%, a sharp decline for the third year in a row.
Promote the “four horizontal and one vertical” strategy: The company adheres to the strategy of interspersing vertical lines overseas with mobile games, mobile games and social games. The games developed by the company, such as “The Last Shot,” “The Legend of the Night,” and “Battle for the Three Kingdoms” received a good response from the market. In terms of overseas markets, the company has successively launched several products in North America, Russia, Taiwan and other regions, achieving certain results. The company's R&D strength is at the top level in China, and has been rated as one of the world's top developers (Top Developers) by Google Play. In the future, the company is expected to achieve a superior advantage in market competition by laying out segmented game markets, developing industrial chain cooperation and platform-based layout, and actively exploring the application of new technologies in the company's business.
The inflection point may have already appeared, and we expect to overtake the car by a corner: in 2015, the company calculated significant loss of goodwill, and in 2016 the company may be able to go to battle lightly. The transition between old and new games was also basically completed in 2015, and game revenue may pick up in 2016. In the future, the company will focus on mobile Internet development. Currently, the company has sufficient cash flow and is in the best position in history. In 2016, the company plans to reserve IP resources and launch premium mobile games; lay out upstream in the industry chain, expand the field of film, television culture, and pan-entertainment, and achieve two-wheel drive for video and audio. Through the horizontal layout of pan-entertainment, the company is expected to return to the path of rapid development.
Profit forecast: We predict that the company's 2016-2018 EPS will be 0.11 yuan, 0.14 yuan, and 0.15 yuan respectively. Based on its closing price of 26.2 yuan on March 25, 2016, the corresponding dynamic PE for 2016-2018 was 247.2 times, 188.7 times, and 174.0 times respectively. The valuation level is high, but considering the company's future development prospects, a “prudent recommendation” rating was given for the first time.
Risk warning: (1) resource integration falls short of expected risks; (2) game business development falls short of expectations.
