Main points of investment
Merger and acquisition of Meisheng yuan, cut into the game business. The company, formerly known as Dilong Xincai, landed in A shares in June 2008 and became the first listed company in the domestic decorative paper industry. In recent years, due to the limited growth space of the decorative building materials business, the company sought new growth through transformation, completed the acquisition of Meisheng in May 2016, cut into the mobile game operation and R & D business, and significantly improved its profitability and business structure.
The mobile game market maintains a high boom, while online mobile games contribute most of the increase. The market size of mobile games grew by nearly 60% in 2016 compared with the same period last year, and maintained a high growth rate of 49.8% in the first half of 2017. While driving the overall market up, it is also grabbing the share of PC games and page games.
Online mobile games: before 2013-2014, PC game manufacturers entered the mobile game market, and with strong research and transportation capabilities, strong capital support and large IP support, popular styles became an important driving force for the development of the mobile game market. But at present, the market is also faced with problems such as increased concentration, fierce competition and so on.
Stand-alone mobile games: the market size is expected to be between 100-20 billion. The market is relatively stable, the concentration is not high, and it has the characteristics of many product types, mild, wide audience, short retention time, low development cost and so on. We predict that the current market share of Meisheng is only about 5%, and it will benefit from the increase of concentration in the future.
A-share single machine mobile game leader, outstanding R & D and operation ability, strong sustainable profitability. Adhering to the mode of combining R & D with agency distribution, the company has developed boutique games such as "Happy Baby forward" and "Pig Man Love shooting". In 2016, R & D investment increased by 83% compared with the same period last year. At the same time, in cooperation with more than 100 channels, we have issued star mobile leisure games such as "arcade Sea King fishing" and "Candy Xiaoxiale 3". The company expects to launch 7 self-developed games and more than 160 agent games annually from 2018 to 2020, with rich reserves.
Stand-alone to online games may become a new bright spot, online mobile games into the harvest period. At present, the top domestic game manufacturers basically change hands or pages change hands. Once a best-selling mobile game is made, it will bring qualitative changes for the company. The company began to lay out the operation of online mobile games in 2015, and jointly operated a number of online mobile games, such as "fight through the Sky" and "Legend of the White-haired Witch". In 2017, the company launched the 3D air combat mobile game "Bath Blood Sky" in September, which was recommended by Apple Inc store for half a month and ranked among the top 10 on the Google Play bestseller list of many countries. At the same time, it is expected to launch the AR 3D action card mobile game "dimensional Summoner" in the near future, with an innovative AR+ABS experience and performance worth looking forward to.
The advertising business has developed rapidly, and the pan-entertainment strategy has been actively promoted. In the process of issuing and operating games, the company has accumulated resources such as customers, channels and advertising platforms, enriched the experience of promotion and marketing, and on this basis, constantly expand the advertising agency business. At the same time, the company takes IP as the core, actively arranges the pan-entertainment industry chain such as games, film and television, variety, animation and so on, and is expected to be the first to break through the linkage between film and roaming. The company has accumulated rich experience in adapting mobile games to IP, and anime IP has produced games such as "Happy Baby forward" and "the Ultimate showdown of Pig Man". Film and TV Variety IP has produced "Shining Dad", "24 hours" and other works.
Profit forecast and investment suggestions: from 2017 to 2019, Dilong Culture realized revenue of 2.963 billion yuan, 3.623 billion yuan and 4.271 billion yuan respectively, an increase of 79.59%, 22.24% and 17.90% over the same period last year, and the net profit of returning home was 572 million yuan, 728 million yuan and 888 million yuan respectively, up 50.98%, 27.34% and 21.95%, respectively. Using the segment valuation method, based on the consistent expected valuation of the industry in 2017, the current valuation level of the game and building materials industry is relatively close, with an overall valuation of 24.6 times PE, with a target price of 16.52 yuan, covered for the first time and given a buy rating.
Risk tips: 1) the game flow is not up to expectations; 2) the market competition is intensified; 3) the project process is not up to expectations; 4) the risk of the realizability of relevant assumptions and the rationality of estimated data; 5) systemic risk.