Events:

In the first three quarters of 2019, the company realized revenue of 269 million yuan, a decrease of 36.64% over the same period last year, net profit of 59.5525 million yuan, an increase of 154.52% over the same period last year, and earnings per share of 0.05yuan, an increase of 150.00% over the same period last year.

Main points of investment:

The effect of optimizing the business structure is obvious. during the reporting period, the company's revenue decreased by 36.64% compared with the same period last year, mainly due to the completion of equity transfer in 11 subsidiary companies in the same period last year, resulting in a reduction in the scope of merger and printing revenue in the transitional period. and a reduction in outdoor advertising revenue However, during the same period, the company continued to adjust and optimize its business structure, and the company's operating costs decreased by 50.24% in the reporting period compared with the same period last year-indicating that the results of the company's adjustment and optimization are very obvious. During the reporting period, the company's investment income and non-operating income decreased by 65.61% and 95.13% respectively compared with the same period last year, but the net profit increased significantly compared with the same period last year. We believe that the company's current main business operation tends to mature, and the gold content of the performance is in the stage of improvement.

In terms of specific business, the company's Internet game business income during the reporting period was 69.9571 million yuan, an increase of 22.78% over the same period last year; operating costs were 44.1798 million yuan, down 0.8% from the same period last year, and the business recovery was more obvious. Among them, the star hit work "National Master H5" mobile games recharged 262 million yuan in the first three quarters, with excellent performance.

Investment rating and profit forecast

We believe that the action force of the company's reform and development is strong, the goal is clear, the results of business optimization begin to appear gradually, and the future focus is to promote the exploration and promotion of new projects around the three established strategic development directions; at the same time, the company has sufficient paper funds, low debt ratio, and strong potential for follow-up business expansion. To sum up, we continue to give the company a "neutral" investment rating and raise its profit forecast. The company's EPS from 2019 to 2021 is expected to be 0.06,0.07 and 0.07 yuan per share, respectively. Investors are advised to keep a close eye on it.

Risk hint

The development of the company's business is not up to expectations, major changes have taken place in the business, the advertising and game industries remain in the doldrums, the bad debt rate of the small loan business has increased significantly, and the external mergers and acquisitions and project landing in the later stage are uncertain.