Adhering to the concept of boutique mobile game developers and operators. Langang Interactive was founded in 2007, started as a client-side game, successfully transformed into a mobile game company in 2013 and successively launched three well-known mobile games called "Blue Port three Swords", laying the foundation for the industry. The company adheres to the concept of boutique creation, and each mobile game contributes stable flow and revenue. The company's business model is self-research + exclusive agent + self-distribution, which can not only maximize the value of the industrial chain, but also effectively manage the product promotion and life cycle. Due to fewer games launched in the first half of the year, the company's operating income in the first three quarters of 2015 was 417 million yuan, down 27% from a year earlier, and a net loss of 8.37 million yuan due to the rapid rise in marketing expenses.
The development of mobile games starts the second half. Although the overall growth of players in the domestic mobile game market slows down, compared with the ARPU value of PC games, there is still 4-5 times the growth space. However, with the rapid change of the competition pattern, the PC game manufacturers have strongly entered the mobile game market, and the concentration has increased rapidly. Challenge the developers of traditional mobile games. Heavy games gradually dominate the market and raise the threshold of the industry. In the pan-IP era, IP has become an important guarantee for the success of mobile games, and the trend of cross-border IP intermodal transport is obvious. With the development of China's overall cultural industry, overseas has become an important market for local mobile game enterprises. In the second half of the mobile game industry, the mobile game company with R & D strength, high-quality IP reserve operation capacity and forward-looking international layout will be able to grab the second half of the industry dividend, expand its share, and may become an international first-class game research and development enterprise.
The three pillars drive the value of Langang Company to increase. Excellent R & D strength. Langang has a set of strict mobile game research and development process, and set up an independent R & D center to optimize the development software, with a complete team configuration, a number of games won industry awards. Invest actively in the field of pan-entertainment to build synergy: it has rich IP reserves, while investing in Axe Technology, Xingmei Holdings, Newby Technology, Guizhou finger interest and other companies to build a complete pan-entertainment ecosystem and form a synergy. In particular, axe technology, as China's first proprietary console game developer, may open up a huge potential growth space for Blue Port. With a forward-looking international layout, Blue Port has been issued in 48 countries and regions around the world, and independent R & D teams have been set up in North America. The rapid expansion of the North American market is just around the corner, and the share of international revenue is increasing.
The catalytic factors of short-and medium-term performance are obvious, and the performance may be reversed in 2016. The company's important works "Shushan War period", "Legend of Miyue" and "Young Bee" will be released soon, and the overall flow is expected to grow rapidly, while the gross profit margin will gradually improve. The proportion of marketing cost, management cost and R & D cost tends to decline.
Risk factors. Increased competition in the industry, poor flow of new games, less-than-expected international and pan-entertainment investment, and liquidity risk of Hong Kong growth Enterprise Market.
Profit forecast, valuation and investment rating. Due to the launch of heavyweight new IP works from the end of 2015 to 2016, the company's 2016 performance is expected to reverse. We predict that the EPS of the company in 2015-17 will be 0.01Compact 0.12Compact 0.32RMB. The current price is HK $4.90, which corresponds to 2015-17 PE times that of 299-33-13. We use the DCF valuation to get the company's value of HK $7.97 / share, the average price-to-earnings ratio of the same Internet entertainment company in Hong Kong is 52.7 times, and the price-to-earnings ratio is estimated to be HK $7.72. combining the average price of the two valuations, the target price is HK $7.85. there is 60% room for growth in the previous price. Considering the company's outstanding R & D level, the layout of the pan-entertainment industry and the pace of internationalization, the "buy" rating is given for the first time, and investors are advised to actively grasp the value of the company.
