Company dynamic events

Meisheng Culture announced its third quarterly report for 2017. Q1-Q3 achieved a revenue of 684 million yuan, an increase of 54.89% over the same period last year, and a net profit of 302 million yuan, an increase of 101.17% over the same period last year. The net profit after deducting non-return was 138 million yuan, an increase of 107.95%. The company released a forecast of its full-year results for 2017, with an estimated net profit range of 3.42-437 million yuan, an increase of 80% over the same period last year.

Comments on matters

Derivatives business and consolidation drive high income growth, investment income increases net profit

The company's Q3 achieved revenue of 333 million yuan in a single quarter, an increase of 33.39% over the same period last year. The company's revenue growth is mainly due to the rapid development of the domestic secondary market and more related exhibitions in the third quarter, driving the rapid growth of the company's IP clothing derivatives business. On the other hand, in March, the company also announced the research and development of mobile social games and operator Zhenqu Network, which promised an annual performance of 107 million yuan, making the company's game business revenue ushered in a big increase. In addition, Meisheng, a subsidiary of Hong Kong, sold 6.17% of Kascend Holding.Inc, the operator of China's leading mobile game live streaming platform Touch TV, and Q3 confirmed an investment income of 140 million yuan, making the company's net profit growth faster than revenue. In terms of expenses, the company's three fees control is stable, and the company's sales, management and financial expense rates are 4.21%, 12.46% and 1.93% respectively, with year-on-year changes of-2.91%,-4.35% and + 1.93% respectively. The increase in financial expenses is mainly due to the increase in interest expenses.

Investing in JAKKS,IP derivatives business is becoming more and more perfect.

The company starts with the production and sales of animation derivatives, and the downstream sales channels and customers continue to expand. At present, the company already has the largest Cosplay clothing brand e-commerce leisurely nest and diffuse gravity. In overseas markets with Disguise, MegaToys, Christy and other animation clothing giants as the core customers. In the first half of this year, the company invested in JAKKS, the third largest toy and animation clothing giant in the United States, with a stake of 19.5%. By investing in JAKKS, the company is expected to enhance its derivatives design and R & D capabilities, and is expected to share the high-quality upstream IP resources owned by JAKKS. The joint venture between the company and JAKKS has helped the company obtain the authorization to sell Walt Disney Company toys and related derivatives.

The business of animation and games is advancing steadily.

The company's animation and game business go hand in hand, and the content is coordinated with each other. According to the company's own animation IP "the Devil" adaptation of the film is in the production stage, with IP mobile games will also be launched next year. The company's other major IP "Star Academy" series has released two seasons of animation, and the third season is scheduled for release in November. Games of the same name have also been launched in the form of web pages, mobile phone app and so on.

Profit forecast and valuation

We estimate that the net profit of shareholders belonging to the parent company from 2017 to 2019 is 395 million yuan, 479 million yuan and 596 million yuan respectively, and the EPS per share is 0.43 yuan, 0.53 yuan and 0.65 yuan respectively, and the corresponding PE is 42.99,35.48,28.54 times. We are optimistic about the future development prospects of the domestic animation derivatives market and the extensive layout of the company in the derivatives industry chain. At the same time, entering the game industry is expected to improve the company's ability to cash in IP. For the first time, it was given a rating of "prudent overweight".

Risk hint

Focus on IP authorization termination risk; outbound investment performance integration is less than expected risk