Main points of investment
Event: on October 28, Meisheng Culture announced that its income in the 20171-3 quarter was 684 million yuan, an increase of 54.89% over the same period last year, and its net profit was 302 million yuan, up 101.17% over the same period last year. In the third quarter, its income was 333 million yuan, up 33.39% over the same period last year, and its net profit was 207 million yuan, an increase of 97.98% over the same period last year. For the whole of 2017, the company is expected to reach 342-437 million yuan, an increase of 80 percent over the same period last year.
Comments:
The income maintains the high growth, the main business is bright, the real interesting network and the effect should continue. Meisheng Culture achieved a revenue growth of 54.89% in the first three quarters. On the one hand, thanks to the steady growth of overseas demand and the rapid development of the domestic secondary market (comic book exhibition, peer sacrifice, etc.), the company's IP clothing derivatives revenue maintained rapid growth. On the other hand, the real fun network began in March this year and table, the annual profit commitment of 103 million yuan to drive the company's animation game business continued growth, endogenous, the company in the first half of the year jointly developed IP "demon god" online, the current number of hits more than 640 million, and began to develop cinema animation movies, upstream content business continues to develop.
The growth of net profit in the first three quarters was in line with expectations, and the increase in financial expenses and the loss reported in the third quarter of Jakks had a certain impact on net profit. The company's gross profit margin in the first three quarters of 2017 was 43.36%, slightly lower than the same period last year and remained basically stable. The three rates (sales, management and finance) are 4.21%, 12.46% and 1.93% respectively, with year-on-year changes of-2.91%,-3.32% and + 1.93%. The increase in financial expenses is mainly due to the increase in interest expenses. The investment income in the first three quarters of 2017 was 187 million yuan, while that of Q3 in a single quarter was 140 million yuan, mainly due to the income from wealth management products and the sale of shares in participating companies (tentacle live broadcast).
In our opinion, at present, the company mainly has the following points of interest:
1) IP derivatives business continues to deepen and nationalize. The acquisition of 19.5% of the shares of American toy, animation and clothing giant JAKKS, and its stake in JAKKS is a continuous deepening of the internationalization of Meisheng Culture. Meisheng Culture continues to promote the international layout with derivatives as a breakthrough. Meisheng Culture currently invests in foreign companies such as Dutch B.V., Costume Craze and JAKKS, all of which are derivatives manufacturers and channel dealers. At the same time, domestic derivatives vigorously layout the secondary market, its leisurely nest and diffuse gravitation is the country's largest cosplay brand.
2) Cash acquisition of Zhenqu Network, improve the layout of games and platforms, and greatly increase the performance of the company.
The company acquired 100% stake in Zhenqu Network for 1.111 billion yuan, with a profit commitment of 1. 5% in 2017-2019.
0.2,1.18 and 137 million yuan, and the transfer of ownership was completed in April.
3) the business of animation and games is making steady progress. Animation projects launched this year include "Star Academy 3", "Devil's Story" and "shoes Crazy". The reserve projects also include "Star Academy" and "Devil's Spirit" movies. In games, women are expected to release "the contract of Light" to leisure card mobile games this year.
4) deeply ploughing women to IP market to tap potential consumption power. The company has a number of IP focusing on female consumption, including Uncle Tongdao, Star College, and the contract of Light, and is expected to become a market leader in female entertainment consumption in the future.
5) it is rich in cash reserves. At present, the company has more than 2 billion cash available, and it will continue to conduct business layout in the upstream IP.
Profit forecast and investment advice: we expect the company to achieve a return net profit of 4.28,5.81 and 730 million yuan from 2017 to 2019, corresponding to EPS of 0.47,0.64 and 0.80 yuan, corresponding to the current valuation of 41-30-24, and the target price of 22 yuan.
Risk hints: 1) the risk of insufficient content innovation; 2) the risk of insufficient integration capacity of pan-entertainment business; 3) the risk that the industry growth rate is not as fast as expected.