Main points of investment:
The performance maintained rapid growth in the first half of the year, and Meisheng's share of profits continued to rise. In 2017, H1 realized revenue of 1.178 billion yuan (+ 95.13%), net profit of 204 million yuan (+ 88.49%) and gross profit margin of 27.91% (down 1.66% from the same period last year). Among them, the traditional main business realized revenue of 489 million yuan (+ 9.25%), accounting for 41.55% of revenue; Meisheng yuan realized operating income of 686 million yuan (+ 348.32%), realized net profit of 162 million yuan, and accounted for 79.4% of profit, which has become the main source of profit of the company. According to the breakdown, the revenue of stand-alone games is 286 million yuan (+ 257.33%), that of advertising promotion is 350 million yuan (+ 509.04%), and that of online games is 22 million yuan (+ 41.51%). At the same time, the company disclosed that it achieved a net profit of 309 million yuan to 438 million yuan (+ 20%) in January and September (compared with the same period last year). Considering the merger of Meisheng yuan in May last year, it still maintained a rapid growth trend in the third quarter.
The acquisition of Meisheng Yuan comprehensively transformed the game distribution and operation business, and "stand-alone + online games + advertising" has become the core growth point. The company acquires Meisheng Yuan to comprehensively transform the game release: 1) on the basis of the traditional intermodal transport platform and the forward payment model, the stand-alone game business focuses on the research and development of high-quality games by the operator Migu Mutual Entertainment exclusive agency. cooperate with Migu Mutual Entertainment in the way of content providers, and try to add a new backward advertising cash model. 2) the online game business has achieved a reserve of high-quality IP in 2016, with emphasis on the research and development of new products during the reporting period. In June 2017, the online game "CAT-SAGA" was launched in Hong Kong, Macao and Taiwan; 3) the market share of mobile advertising business was further increased, with revenue of 350 million yuan (+ 509.04%) during the reporting period. At the same time, Meisheng continues to carry out the layout of film and tourism linkage by obtaining the copyright of high-quality film and television programs and participating in TV series shooting, and the pan-entertainment layout continues to deepen.
"Game + traditional" business two-wheel drive, continue to build a "platform" company. 1) the revenue of the company's traditional business in the first half of the year was 489 million yuan (+ 9.25%), the operating cost rose rapidly, and the gross profit margin of the subdivision business declined compared with the same period last year; the traditional business has been restructured internally, and a number of decorative building materials businesses have been assigned to subsidiaries; 2) in terms of game business, the company has firmly occupied the first echelon of stand-alone mobile games and occupies a core position in the industrial chain. According to the annual report data, we estimate that the number of stand-alone games released by the company will increase from 30 games per month in 2016 to 35 games per month in 2017. in the future, we will transform the issuance of online games based on operational experience to create long-term "waist" products according to our own advantages. build a platform game company. In 2015-2017, Meisheng promised that the net profit would not be less than 180 million yuan (actual 184 million yuan), 320 million (actual 365 million yuan) and 468 million yuan. The industry bet was exceeded in the first two years of the commitment period, and the average growth rate of committed performance in three years was 62%.
Profit forecast: according to the development of the company's semi-annual report, we have updated the traditional and game revenue assumptions. It is estimated that the company's EPS from 2017 to 2019 will be 0.62,0.80,1.00 yuan respectively. With reference to the consensus expectation of the comparable company's PE in 2017, we give the company a valuation of 28 times in 2017, corresponding to the target price of 17.36 yuan. Maintain the buy rating.
Risk hint: the performance of mobile game products is not as expected, the profit commitment is not up to standard, and the goodwill impairment risk.