Strategic transformation into the field of mobile games, to build a complete game industry chain. At the beginning of the outbreak of mobile games, Tianzhou Culture strategically acquired mobile game developers Magic Technology and Youai Network. In 2016, book publishing and distribution and mobile online games accounted for 55.7% and 44.3% of the total revenue, respectively. This time, it is proposed to acquire the remaining 73% equity of mobile games issuers, obtain high-quality distribution channels, and set up the framework of the whole industry chain of mobile games.
Benefiting from the high growth and high gross profit of the mobile game plate, the company has a good performance. The Magic Times contributed 98 million yuan, 154 million yuan and 163 million yuan to the net profit from 2014 to 2016, accounting for 83.1%, 87.5% and 66.8% of the net profit of the year. The 100% equity interest in Youai Network has been included in the merger since September 1, 2016, increasing net profit by 49.1429 million yuan. In 2016, revenue from the game sector accounted for 44.3%, gross profit accounted for 66.0%, gross profit reached 91.7%, and revenue from "forgotten Immortals" and "Crouching Tiger, Hidden Dragon" accounted for 26% of the total revenue. Since entering the game field, in the past three years, the company's revenue compound growth rate has been 40.7%, net profit compound growth rate has been 134.2%, gross profit margin has increased from 28.7% in 2013 to 61.5% in 2016, and net profit rate has increased from 6.1% to 31.3%. Starting from 2017, Youai Network and the people will be listed together for the whole year, with performance commitment and transformation and upgrading to support the company's future performance growth.
In the future, the company will fully benefit from the synergy of the existing business architecture and improve profitability.
The company plans to enhance the output capacity of Youai content through "Book Resources Collaborative Game IP,VR/AR Game Research and Development", and form a synergistic effect with a wide range of distribution channel systems. In the future, it will benefit from the purchasing capacity, reduce channel costs, and take the "product + flow" route, and the collaborative play is expected to further thicken the company's performance.
Investment advice: the company has acquired three times (including the proposed acquisition of the remaining shares of technology) high-quality mobile game developers and issuers, to build a complete game industry chain, rapid performance growth. Benefiting from the magnificent demeanor of the game industry, the company has more room for growth; to create the business structure of "publishing + games, game R & D + distribution", it will form a synergy effect in the future, and the performance will continue to grow at a high speed. We expect the company's net profit from 2017 to 2019 to be 500 million, 700 million and 800 million respectively. If the additional issuance is completed, the company's share capital will be 916 million shares (excluding matching financing), and the corresponding earnings per share will be 0.54,0.76,0.87 yuan respectively. With reference to similar comparable companies, a 6-month 30X valuation is given, corresponding to the target price of 16.2 yuan, with a "buy-A" rating for the first time.
Risk tips: fierce market competition, M & An integration effect is not up to expectations, performance is lower than expected, goodwill impairment.