Due to the absence of new games and the continuous decline in original game revenue, the company's revenue is expected to decline month-on-month.
Zhen Huan Zhuan performed well in the first month and is expected to make a significant revenue contribution in the fourth quarter.
Downgrade the 2015-17 earnings forecast, maintain the neutral rating and give a new target price HK$5.33 based on the industry average 9.9x2016E Pamp E
The absence of new game releases in the third quarter will lead to a quarter-on-quarter decline in the company's quarterly revenue.
As there is no official release of new game products in the third quarter of Blueport, and the recharge flow and revenue of the original games are expected to continue to decline in the middle and latter part of the life cycle, we believe that the revenue of Blueport 3Q15 will decline month-on-month. Looking forward to the fourth quarter, in addition to Zhen Huan's official launch, the schedule of other games is still unclear. We believe that the competitive pressure of the market, the coordination of the schedule with the film and television works with IP, and the process and feedback of the distribution channel for the game testing will make it difficult for Langang to determine the launch time of the game, so we expect that it will be difficult to estimate when subsequent games will begin to contribute revenue. For the above reasons, we have lowered our revenue forecasts for 3Q15 and 4Q15 by 25% and 26% respectively, and expect a net loss of about 4 million yuan for Non-GAAP for 3Q15.
The Legend of Zhen Huan was launched in early October and is expected to contribute considerable revenue in the fourth quarter.
The Legend of Zhen Huan was officially released on major platforms such as Apple Inc iOS and Android on October 10, and mainstream cable networks such as Anhui and Beijing Satellite TV replayed the Legend of Zhen Huan in the harem to coincide with the official launch of the game, and promoted the game in TV series' patch ads. "Zhen Huan Zhuan" since its launch, the ranking in Apple Inc iOS bestseller list is roughly between 15 and 25, reflecting the players' good willingness to recharge and the effectiveness of all kinds of publicity. According to the ranking of the game in iOS, we expect that the omni-channel recharge of the game in the first month is expected to reach about RMB 30 million, which is in line with the domestic standard of "S" class mobile travel. We believe that the successful release of Legend of Zhen Huan will 1) bring considerable revenue to the company in 4Q15, and 2) lay a good player warm-up and publicity foundation for new mobile games such as Legend of Miyue and Legend of the White-haired Witch to be released at the end of the year.
Valuation and rating
In view of the fact that 1) the company's follow-up IP game schedule is still unclear; 2) the competition in the game market is becoming fierce; and 3) the company's structural adjustment may have a negative impact on R & D efficiency, we have lowered our revenue forecast for 2015-17 by 21%, 31%, 30%, and Non-GAAP net profit forecast of 53%, 18%, and 21%, respectively. Our current revenue forecasts for 2015-17 are 34%, 31% and 24% lower than the market consensus, respectively, and our forecasts for Non-GAAP net profit are 53%, 38% and 30%, respectively. Currently, the company's share price corresponds to 10.4x 2016E P amp E, and we maintain our neutral rating and give it a new target price HK$5.33 based on the industry average 9.9 x 2016E P amp E.