Since the transformation of traditional chemical enterprises, relying on subsidiaries in-depth layout of the global mobile Internet culture industry system. Since 2016, the company has acquired Hangzhou Zhe Xin, Xingbao Paradise, Daily Power and Outfit7, layout game distribution, game research and development and children's education business. In 2019, in order to optimize the allocation of resources and focus on the core business, the company transferred all chemical assets and currently earns revenue mainly through advertising, game distribution and IP licensing. The company's transformation dividend is remarkable, the performance is growing rapidly, and the performance of the foreign market is excellent.
In 2018, revenue growth at home and abroad reached 46.27% and 180.31% respectively, and operating cash flow increased by 268.16% compared with the same period last year. In 2019, it was affected by the impairment of goodwill and the strategic contraction of the game distribution business.
With IP as the carrier, through games, film and television, derivative business, multi-dimensional construction of the Tom Cat family ecosystem.
Outfit7 ranks fifth among 2019Q2 world game developers in terms of downloads, and its "talking Tom Cats" IP covers more than a billion people, with an average monthly MAU of more than 350 million. In 2018, Jinke Culture acquired all the shares of Outfit7 and worked together to build a "global ecological mobile Internet enterprise" with Tom Cat as the core. In terms of game business, relying on the classic IP, the company gradually broadens the category and IP image, and business diversification contributes to the steady growth of users and profitability. The parkour game "Tom Cat Parkour" ranked among the top 10 monthly active users in China in 2019, and the competitive game "Tom Cat Adventure" was launched at the beginning of 2020, which is expected to increase domestic purchase income. In the aspect of IP derivative, the company realizes the blue ocean in the field of children, and reaches the parent-child group through educational products, authorized goods, offline paradise, animated short films and other forms to shape the parent-child life brand. By the first half of 2019, Jinke Culture has launched a total of 260 IP derivatives SPU and 900 SKU, covering education, culture, transportation, film and television, catering and other consumer areas.
The performance of the game in the first quarter of 2020 is outstanding, and the byte jump of cooperation and the layout of emerging markets are expected to lead to sustained growth of the company's performance. The company's leisure games performed well during the Spring Festival, and the ranking of popular mobile games in the IOS free list showed a gradual upward trend, and remained relatively high after the seventh day of the first lunar month. In terms of user size, the company continues to distribute high-growth and low-penetration regions such as Africa and South America. In 2019, iOS and Google Play game downloads ranked 4th in India, Brazil, Russia and Indonesia, respectively. It is expected to continue to enjoy user growth dividends by opening up new channels, offline promotion and setting up offices. In terms of cash efficiency, the company cooperated deeply with Toutiao and connected to the pangolin alliance. Pangolin Alliance has sufficient commercial resources (8.5W advertisers), efficient algorithms and large-scale high unit price native advertising, which will help Jinke cultural games to achieve efficient flow.
Investment suggestion: the company's net return profit from 2019 to 2021 is estimated to be-24Universe 9.22 billion yuan respectively. The company's boutique game research and development gradually follow up, access to the headline pangolin system to improve the efficiency of advertising.
Give the company a target market capitalization of 15.674 billion yuan in 2020, corresponding to the target price of 4.42 yuan and 17x PE, with a "buy" rating for the first time.
Risk tip: the risk of policy change, the game performance is not as good as expected, and the advertising growth rate is not as expected.