Key points of investment
Joined hands with 5 provincial radio and television network companies to launch innovative pilot virtual reality services. 1) In June 2017, the company successively signed a “Cooperation Agreement on Jointly Innovating and Testing Virtual Reality Business” with Tianwei Video, Jishi Media, China Digital Media, Radio and Television Network, and Henan Cable to conduct VR tests in Shenzhen and various provinces including Jilin, Zhejiang, Shaanxi, and Henan; 2) Among them, the number of first pilot users in a single city or region was not less than 1,000, with at least one frequency point as a test channel. The number of urban digital TV users was not less than 300,000, and the two-way network penetration rate was not less than 50%, ARPU per household. Not less than 30 yuan/month; 3) As the agreement progresses, the “VR+ Radio and Television” pilot is imminent. It is of great significance for the next step in promoting virtual reality services on a large scale and successfully building a high-quality VR online 2C channel.
VR+ radio and television is an important choice for reaching the C end online. 1) Broadcast transmission is used to ensure the smooth transmission of high-definition VR content. Traditional Internet is limited by bandwidth, making it difficult to fully meet VR high-definition content transmission requirements within 3-5 years; 2) Opening VR online channels can accelerate high-quality content to reach the C end, drive users to buy VR hardware, and can open up the industry chain to help CP monetize content and promote the development of the entire VR industry.
Profit forecast: The company's net profit for 2017/18/19 is estimated to be 0.16/0.18/20 million yuan, corresponding to the current stock price PE 212/186/167 times, respectively. I am optimistic that the company will maintain a “increase in holdings” rating based on the content layout of radio and television channels.
Risk warning: The VR industry is not developing as fast as expected; video game revenue is falling short of expectations.
