1. What happened: we made an initial analysis of the company's business operations in response to the release of the company's 2013 annual report and analyst meetings.
two。 Our analysis and judgment
(1) to create a platform + full-chain layout of R & D, with a solid leading position
The company is the leading representative of the domestic page game platform + R & D two-wheel model. In 13 years, the company has launched 14 page games, 34 self-developed games, 5 mobile games and 6 in operation. With a total revenue of 1.18 billion RMB, an increase of 52.3% over the same period last year, it is one of the top 3 companies in terms of domestic page game operation scale. The total market share of the company has been about 10% in the industry for 13 years, but the number of users of the operating platform 91wan has grown rapidly, and the number of monthly paid users of the company's MPU has increased from 71000 in 12 years to 109000 in 13 years. The revenue of the game operation sector accounts for 32%, and the growth rate is much faster than that of self-research business, which will not only stabilize the risk fluctuation of the company's product development project, but also lower the overall profit margin.
(2) take a stake in the developer of the Devil's Tower to complement mobile games and overseas issuance business.
The company acquired a 21% stake in Hong Kong's leading mobile game developer Magic Feature Inc. 21% for US $70 million + US $24.2 million (additional or probable consideration). The company's mobile game "Devil's Tower" has 11 million downloads worldwide as of March 2014, ranking firmly in the top three of the best-selling lists of appstore and google play in Hong Kong and Taiwan. at the same time, the game has recently landed on Tencent's Wechat platform, and it is expected that only the monthly flow of the game in China will exceed 50 million. The follow-up release of the game in Europe and the United States will also greatly increase the overall revenue, and the overall net profit for the whole year is expected to reach 80 million US dollars. At the same time, the company's excellent issuing experience on overseas platforms such as Facebook Inc can greatly complement the distribution channels and capabilities of overseas page games and mobile games.
(3) the internal mobile game business is mainly distributed by agents, and the platform focuses on the developer community.
The company invested 32 million RMB to set up a small partnership fund for early team investment. It is expected to launch 12 mobile games in 14 years, mainly self-research and overseas only generation. The company will launch a SDK toolkit that is convenient for developers to develop and build their own developer community. At the same time, the company will seize the opportunity to cut into the video game market.
3. Valuation, investment advice
The company's 13-year GAAP net profit was a loss of 475 million, mainly due to a change in the fair value of convertible preferred shares, corresponding to Non-GAAP net profit of 325 million, a year-on-year increase of 37.6%.
We believe that the company's business structure is currently in the adjustment stage, and the proportion of the issuance business with low volatility of performance is increasing while driving down the overall profit margin; at the same time, under the current fixed market pattern of large manufacturers, the company's issuance business has limited room for growth. The expansion of mobile game companies is slow, and the self-research team may take a long time to adapt to the new product market. We expect that the company's 14 / 15 GAAP net profit will reach 3.67 / 483 million yuan, corresponding to GAAP-EPS 2.89 / 3.81 yuan, and the current stock price will correspond to 14 PE for 15 years 12.14X/9.23X. The EPS of Non-GAAP 14 / 15 is ¥3.36 / ¥4.27 respectively, and the corresponding share price PE is 10.45X/8.22X respectively. The company's share price valuation is significantly lower than the A-share related sector companies, but due to market valuation differences, as well as the company's business adjustment risk, we temporarily give a "cautious recommendation" initial rating.
Main risks: the launch of the new product does not meet expectations, and the revenue of the acquisition target does not meet expectations.