Main points of investment:
The company's total revenue is growing rapidly, and the development of new business is beginning to bear fruit. In 2016, the company achieved total operating income of 1.647 billion yuan, an increase of 152.62% over the same period last year, net profit of 53 million yuan, an increase of-69.53%, and earnings per share of 0.19 yuan, an increase of-69.84% over the same period last year. Of the company's annual revenue, 917 million yuan came from commodity sales business, accounting for 55.68%; 579 million yuan from advertising business, accounting for 35.14%; 78 million yuan from network payment service revenue, accounting for 4.74%; 50 million yuan from management fees, accounting for 3.04%; 15 million yuan from software promotion business, accounting for 0.9% Other business is 8 million yuan, accounting for 0.5%. The main reason for the total revenue growth is that while the company's traditional video business maintained a steady growth of 25% in 2016, the new business modules Storm TV and Magic Mirror entered a period of scale growth. During the reporting period, the main reasons for the decline in net profit are: 1) the new business Storm TV is in the stage of accumulating users and has not yet entered the profit period; 2) the sharp rise in the price of raw materials such as upstream TV panels has led to a decrease in gross profit margin; and 3) it is affected by the costs related to the equity incentive scheme. In spite of this, we still think that the future of Storm TV business is worth looking forward to. The company builds the competitive advantage of Internet TV business through the integration of software and hardware, and is in a leading position in the industry for only one year, and is expected to make profits in the future.
Deeply cultivate the Internet video business and build the barriers of the Internet TV industry. During the reporting period, the company worked hard in the Internet video business, in order to enhance the user experience as the core in-depth study of user needs, continuous innovation, iterative products. By introducing Storm Player's 10th anniversary version, optimizing UI design, adding UHD to video playback, and opening up user systems, a series of measures have been taken to enhance user stickiness. The number of VIP paid households has increased by nearly 70.94% over the previous year, and paid income has increased by 264.02%. Storm TV continues to enrich the hardware product line, through online and offline sales strategy, achieved sales of 800000 units this year, accounting for more than 50% of the company's total revenue.
At the same time, the software service function is improved through R & D and innovation. Strategic investment to set up storm film industry, storm sports layout content end business, in-depth cooperation with content providers such as Storm Player, iQIYI, Inc. and Aofi animation, and sharing VR content resources with Storm Mirror, has obvious competitive advantages in content coverage and content update speed.
The key technology of VR has made a breakthrough, and Storm Sports has been recognized by the industry. During the reporting period, the cumulative sales of Storm Mirror exceeded 2 million, ranking first in China. Single users used it for 35 minutes in 2016, an increase of 75% over the previous year. The latest all-in-one storm mirror "3K screen concept machine" Matrix and VR glasses S1 have made a breakthrough in clarity, head weight and vertigo, which hinder the popularity of VR. The new generation of self-developed VR ROM-Magic UI2.0 also shows the cutting-edge integrated solution of mobile space positioning and gesture recognition to promote the industrialization of VR. As the largest VR film and television resource library in China, Storm Mirror has more than 30, 000 movies and TV series and more than 200 VR games, including "Warcraft", "Chinese New Song" and "Ghost blowing Lantern".
And other well-known IP resources. The strategic layout of Storm Sports second-generation products won the sixth comprehensive sports APP in 2016, the third place in sports platform APP, and many other awards in XIAOMI application market, with more than 2000 daily updates, greatly leading the industry in content update efficiency.
Through the DT big data center to get through the users of various sections to enhance the synergy of various businesses. The company big data technology has opened four customer acquisition platforms. Through the collection, analysis and summary of the data of the whole platform, we can achieve accurate user portraits and customized content, improve the company's operational efficiency and commercial cash efficiency, and expand the company's brand awareness.
Profit forecast. In 2017, the company will further promote the DT entertainment strategic layout of "platform + content + data" and strengthen the advantages of integrated hardware and software operation. with the reduction of customer costs for new business and the steady growth of traditional business brought by precision marketing, we estimate that the company's EPS from 2017 to 2019 will be 0.63,0.72 and 0.75 yuan respectively. The PE of Leeco, Oriental Fortune and Sinnet in 2017 was 53.14,49.11,68.92 times respectively. In view of the fact that the company is in a period of expansion and the acquisition of new business users is optimistic, we value the company 67 times in 2017, corresponding to the target price of 42.21 yuan. Give an overweight rating.
Risk hint. Business integration risk, new business is not as expected, industry competition intensifies.