An overview of an event
On October 28, the company released a third-quarter report that 20Q3 achieved revenue of 737 million yuan, an increase of 51.95% over the same period last year; net profit of 310 million yuan, an increase of 118.89% over the same period last year, about the median of previous performance forecasts; and net profit of 253 million yuan, an increase of 96.28% over the same period last year. The net operating cash flow reached 450 million yuan, an increase of 103.15% over the same period last year.
In a single quarter, 20Q3 achieved an operating income of 262 million yuan in a single quarter, an increase of 37.05% over the same period last year and 12.71% over the previous quarter. The net profit in a single quarter was 100 million yuan, which was about the median of the previous forecast, an increase of 77.47% over the same period last year and a slight decrease of 8.11% from the previous quarter.
II. Analysis and judgment
The 20Q3 performance is in line with the forecast, and the sales expenses for promoting new games have risen slightly. During Q3, the PC games of "Dream three Kingdoms", the mobile games of "Dream three Kingdoms" and the mobile network of subsidiaries continue to drive the growth of revenue and home net profit. Among them, the 10th anniversary celebration of the "Dream three Kingdoms" PC game opened on September 26, and we expect that the profits generated by the event will be further reflected in Q4; during the "Dream three Kingdoms" mobile game Q3, the average ranking in the IOS game bestseller list is 206, up to the 39th place on the list, and the overall performance is relatively stable. Q4 single-quarter sales expenses reached 71 million yuan, up 61.48% month-on-month and 30.85% year-on-year. It is expected to be due to the fact that the new tour will be launched soon and the company will increase its marketing and promotion. The contract liability reached 403 million yuan, an increase of 14.49% over the previous month, which is expected to be mainly due to the increase in deferred income.
The launch of Xinyou is expected to increase the profits of Q4, and the subsidiary company is expected to set up products to go out to sea. The key two-dimensional game "the Solver" developed by the company has been launched in all channels on October 22, and so far it has been maintained in about 50-60 places on the ios best-seller list. Q4 is expected to begin to contribute revenue to the company. My knight-errant, another retro martial arts mobile game of the company, has been launched on November 4, with 500000 TAPTAP reservations and 1.09 million official website reservations. It is optimistic that the company's game category will make a breakthrough and continue to contribute profits after the game is launched. Recently, the company has promoted the establishment of subsidiaries in Japan and Singapore, paving the way for products to go out to sea; in the future, games such as "DC: peak Battlefield" and "Barbarian Battle 2" in the future "Dream three Kingdoms" series and reserves are expected to go out to sea, opening up new profit growth opportunities.
III. Investment suggestions
We predict that the return net profit of the company from 2020 to 2022 will be 415 million yuan, 626 million yuan and 800 million yuan, and the corresponding PE of the company's current stock price is 24x, 16x and 13x respectively. Short-term optimistic about the company's main product "Dream three Kingdoms" PC game recovery + mobile games long-term operation to stabilize the performance of the basic set, medium-term look at "my chivalrous", "X2" and other new games online continue to thicken profits, long-term optimistic about the company and Tencent in-depth cooperation to assist research and transportation, at the same time, the company's cash flow is better, the company management for the product focus is higher, to maintain the "recommended" rating.
Fourth, risk tips:
The new tour is not online as scheduled, the game flow is not up to expectations, and the regulatory risks of game policies at home and abroad.
