Event: the company released its semi-annual report for 2017. the results of the report have been disclosed through KuaiBao that the income in the first half of the year was 1.178 billion yuan, an increase of 95.13% over the same period last year, and the net profit of returning home was 204 million yuan, an increase of 88.49% over the same period last year. The company expects to achieve a net profit of 3.09-438 million yuan in the first three quarters of 2017, and the range of Q3 net profit in a single quarter is 1.05-234 million yuan. The third quarter performance forecast is in line with expectations.
Main points of investment:
The forecast of the third-quarter results is in line with expectations, and the quarter-on-quarter performance is expected to hit a new high: the company released its semi-annual report for 2017, and the forecast for the third quarter of 2017 is in line with expectations. The net profit of Q3 in the first three quarters of 2017 is expected to be 3.09-438 million yuan, and the range of Q3 net profit in a single quarter is 1.05-234 million yuan. In terms of game business in the first half of the year, subsidiary Meisheng Yuan achieved an income of 686 million yuan and a net profit of 162 million yuan, with revenue and profit up 38.07% and 57.64% respectively in the second quarter. The gaming business led the company's profit margins to pick up in the second quarter while revenue hit a new high. We believe that as the operation of new products is gradually stable and new products are launched one after another, the performance in the third quarter is expected to reach a new high, and the month-on-month growth will continue to be relatively high.
The stand-alone business tries to realize new cash, and the online game business cuts from pure intermodal transport to R & D and distribution: in the past, the company used to focus on the forward payment business of operators on stand-alone games, and tried the advertising cash model at the end of 16, through backward advertising to achieve traffic retention. Judging from the revenue structure in the first half of the year, the company's stand-alone game business and advertising promotion business contributed 286 million yuan and 350 million yuan respectively, which is still the main source of contribution to the game business. In the online game business, since the end of last year, the company has cut into the R & D and issuance of online games from pure online games through transportation. At present, there are card categories, MMO, SLG and other categories in reserve. In the second half of the year, two heavyweight online game products are expected to be released, and the expansion of online game research and transportation business is expected to further increase its performance.
Marginal change to enhance business coordination, ahead of the layout of IP to create a "new movie game linkage": Mason retains the front-end traffic in the leisure stand-alone plate, cuts into the R & D and distribution of online games in the middle, and the back-end develops the investment business through the mobile advertising plate, reserving the online game buying team, and the marginal changes enhance the synergy among the three plates. In addition, in the long run, starting from the incubator of IP, the company plans the video game linkage project more than 18 months in advance, and pursues to achieve earlier and more in-depth cooperation in the film game linkage project, so as to achieve the magnifying effect of IP. We believe that the coordination between the business of several major sectors of the company will play a positive role in promoting the healthy development of the business. At the same time, the company's forward-looking layout in IP and project reserves brings greater certainty for long-term development.
Investment suggestion: the company's performance forecast for three quarters is in line with expectations. On new business type, the three major businesses of leisure stand-alone, online game research and transportation, and mobile advertising are developing in parallel, and the margin is changing positively. The launch of blockbuster online game products in the second half of the year is expected to further consolidate performance, and long-term development pays attention to the steady progress of movie game linkage projects. We expect the company to maintain a "buy" rating of $0.62, 0.76, 0.98 EPS in 2019, corresponding to the current share price PE of 21-17-14, maintaining a "buy" rating.
Risk hint: the operation data of existing products are declining too fast, the performance of new products is not as good as expected, and the traditional business has declined significantly.
