Tianzhou Culture released its 2017 mid-year report: the company achieved a total operating income of 363 million yuan, an increase of 51.75% over the same period last year, a net profit of 110 million yuan for shareholders of listed companies, an increase of 52.40% over the same period last year, and a deduction of 103 million yuan for non-net profit, an increase of 44.82% over the same period last year. The corresponding earnings per share is 0.13 yuan.
The performance was in line with expectations, and the game business continued to grow: the company achieved a total revenue of 363 million yuan in the first half of 2017, an increase of 51.75% over the same period last year. Of this total, the revenue of mobile online games reached 234 million yuan, an increase of 149.03% over the same period last year, mainly due to the increase in the scope of the merger over the same period last year and the consolidation of the business revenue of the new Youai network. The gross profit margin of the mobile online game business was 77.77%, down 14.97% from last year, mainly due to the new operating cost of Youai network and the increase in the channel cost of the existing game business, resulting in an increase in the operating cost of mobile online games compared with the same period last year. The company's book publishing and distribution business achieved revenue of 129 million yuan, down 11.32% from the same period last year.
Continue to increase IP reserves: at present, the company operates a total of 31 game products, the latest online operation of the "Fengyun World OL" sequel "Fengyun World rekindled" the monthly recharge is about 10 million yuan, the market response is good. Independent research and operation of "forget Immortals", "Crouching Tiger, Hidden Dragon", "Fengyun World OL" and other games maintain a good sustainable profitability. In the second half of the year, nearly 10 games such as "Crouching Tiger, Hidden Dragon II" and "the rise of the Empire of Da Qin" will be launched one after another, and the continuous growth in performance is worth looking forward to. The company actively carries on the IP resource reserve, at the same time enhances the game release strength unceasingly, has represented many well-known games during the reporting period.
Acquisition of first sight technology, improve the industrial layout: the company intends to acquire the remaining 73% stake in first sight technology, and will hold 100% stake in first sight technology after the acquisition is completed. For the first time, science and technology has successfully issued a number of well-known mobile games with the highest monthly flow of more than 10 million, such as "making evil tricks", "random bombardment of the three Kingdoms" and so on. Magic Times and Youai Network, a wholly-owned subsidiary of the company, have a certain influence in the field of mobile online game research and development. For the first time, technology is a strong mobile online game publisher. This merger and acquisition will enhance the company's mobile online game release strength, achieve good coordination with the original resources, and enhance market competitiveness.
Share buyback demonstrates the company's confidence: the company intends to use no more than 17.20 yuan per share for employee stock ownership plan or equity incentive plan, with a repurchase amount of 200 million to 300 million yuan, which will help the company to attract talents and promote the company's long-term development. at the same time, it shows the management's confidence in the company.
Profit forecast: we expect the company's operating income to reach 10.92,13.32 and 1.599 billion yuan respectively from 2017 to 2019, with EPS of 0.44,0.56 and 0.67 yuan respectively, calculated according to the closing price of 12.60 yuan on August 8, 2017, corresponding to the dynamic PE of 28.8X, 22.7X and 18.8X respectively from 2017 to 2019. We are optimistic about the future development of the company, covering it for the first time and giving it a "recommended" investment rating.
Risk hints: (1) market competition aggravates the risk; (2) the risk of rising cost.