Event: the company released three quarterly reports, with revenue of 1.971 billion yuan from January to September 2017, an increase of 73.16% over the same period last year, and a net profit of 338 million yuan, an increase of 31.29% over the same period last year. Of this total, Q3 achieved revenue of 793 million yuan in a single quarter, an increase of 48.36% over the same period last year, with a net profit of 134 million yuan, down 9.90% from the same period last year, deducting 132 million yuan from non-parent net profit, an increase of 7.61% over the same period last year. At the same time, the company issued a forecast of full-year results, and expected the full-year net profit to be 530-682 million yuan, an increase of 40% and 80% over the same period last year.
Main points of investment:
The performance forecast exceeded expectations, and the decline in expenses reflected the advantage of scale: the company's third-quarter results were in line with expectations, with Q3 revenue of 793 million yuan and net profit of 134 million yuan, an increase of 7.39% compared with the previous quarter. The company's performance forecast exceeded expectations. The net profit of Q4 returned to its mother in a single quarter ranged from 1.92 yuan to 343 million yuan, a month-on-month increase of 43%. The month-on-month growth was mainly due to the performance increment brought about by the launch of new online games one after another. In terms of gross margin, due to the influence of the early promotion of online games, the expansion of advertising business with low gross profit margin and the business of decorative materials, the gross profit margin declined, but the whole system remained stable; in terms of expenses, the overall expense rate continued to decline in the third quarter compared with the previous quarter, reflecting the scale advantage brought by revenue growth.
The launch of blockbuster new products is imminent, and the online game business promotes the high growth of performance compared with the previous year: the two major businesses of the subsidiary MYY in the past are stand-alone games and advertising business. As the agent's mobile game products are launched one after another, the company's online game business is on the rise. The company launched the air combat mobile game "Bath Blood Sky" in September, which has been recommended by Apple Inc for half a month, and the current best-seller list is stable. The company is expected to launch the blockbuster mobile game product "dimensional Summoner" in the fourth quarter, which uses the heavy play of AR+ cards, and the innovative form is expected to become an important increment in the fourth quarter.
Marginal continuous improvement, ahead of the layout of IP to create a "new movie game linkage": the subsidiary Meisheng Yuan carries out the front-end flow retention in the leisure stand-alone plate, the middle end cuts into the online game R & D and distribution, and the back end develops the investment business through the mobile advertising plate and reserves the online game buying team. the marginal change has enhanced the synergy among the three plates, and the rise of the current online game business reflects the company's marginal continuous improvement. In the long run, the company starts from the IP incubator, plans the movie and game linkage project more than 18 months in advance, and pursues to achieve earlier and more in-depth cooperation in the film and 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 advice: the company reported results in three quarters in line with expectations, and issued a forecast of full-year results, which is expected to achieve a net profit range of 5.3-680 million, exceeding our previous expectations. We believe that the high growth in performance compared with the previous month is mainly due to the rapid development of the online game business. The launch of the blockbuster online game products in the fourth quarter is expected to further consolidate the performance, and the long-term development will pay attention to the steady progress of the movie game linkage project. We expect the company to maintain a "buy" rating of $0.70, $0.79, or $0.86, respectively, in 2019, corresponding to the current share price of PE, which is multiple of 21-19-17.
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.
