Company events:
On October 29, 2020, the company released the three-quarter report of 2020. In the first three quarters, the company achieved operating income of 737 million yuan, an increase of 52% over the same period last year. The net profit returned to the mother was 310 million yuan, up 119% over the same period last year. The non-net profit deducted from the mother was 253 million yuan, an increase of 96% over the same period last year. In the single quarter of Q3, the company achieved operating income of 262 million yuan, an increase of 37.1% over the same period last year, an increase of 12.7% over the same period last year, a net profit of 100 million yuan, an increase of 77.5% over the same period last year, down 8.1% from a month earlier, and a non-net profit of 76 million yuan, an increase of 46.0% over the same period last year. Down 8.4%.
Event comments:
The performance was in line with expectations, and the revenue growth mainly came from the net profit of 310 million yuan in the first three quarters of 2020, an increase of 119% over the same period last year, which was in line with the range of 292-332 million yuan in the performance forecast. The main reasons for the rapid growth of the company's net profit are:
1) the product line of "Dream three Kingdoms" has a bright performance: in terms of PC games, thanks to the improvement of "Dream three Kingdoms" PC game business and access to the WeGame platform, "Dream three Kingdoms" PC game revenue has increased compared with the same period last year, while the 10th anniversary celebration of "Dream three Kingdoms" since September 26 is expected to bring an increase in Q4 performance. In terms of mobile games, driven by the celebration of the first anniversary of its launch, the income of the duplicate version of "Dream three Kingdoms Mobile Games" continues to rise, and the game is currently in the range of 100th to 200th on the IOS bestseller list, with a relatively stable performance. 2) merge the mobile network: the company acquired 80% of the shares in the mobile network in March 2019 and included in the consolidated statement. The mobile network promises to achieve net profit of 5000 gamma, 60,000,72 million yuan and 2020H1 mobile network of 36.51 million yuan respectively in 2019, 2020 and 2021 respectively.
Q3's revenue in a single quarter is similar to that of Q1 and Q2, and the company's endogenous growth momentum is sufficient. Q3 achieved operating income of 262 million yuan in a single quarter, an increase of 37.1% over the same period last year. The net profit returned to its mother was 100 million yuan, an increase of 77.5% over the same period last year, roughly the same as that of Q1 and Q2, indicating that the company's performance did not fluctuate significantly after the epidemic was controlled, and the driving force for endogenous growth was sufficient.
After the company enters a new round of product cycle and the follow-up development momentum fully enters Q4, a new round of product cycle begins. Among them, the popular two-dimensional mobile game "the reliever" was launched on October 22 and is currently in the 15th place on the overall list of IOS games, with more than 26w TapTap downloads. My Chivalrous, which is tentatively scheduled to be launched on November 4, is an open world, retro martial arts strategy RPG mobile game, run by the company's co-founder and well-known game producer Yu Xiaoliang, and has signed a contract for Aurora Mobile Limited to be an exclusive agent by Tencent. The main products in 2021 include: MOBA mobile game "DC:" developed by DC's major superhero authorized companies.
The top battlefield; the independent game "Yuan Neng out of control" with high reputation; and "Barbarian Battle II", which inherits the excellent standard of previous work and is expected to achieve the transformation from high word-of-mouth to high return.
Investment advice:
We reiterate our previous view that the company's short-term logic lies in the product line this year and next, and the medium-and long-term logic lies in the company's excellent R & D strength and deep-rooted innovation genes. In terms of product line, the launch of the whole platform of "Solver" marks the beginning of a new round of product cycle, followed by Tencent's only generation of "my Chivalrous" will be launched in November; while the company's main products in 2021 include the DC authorized MOBA mobile game "DC: peak Battlefield" and the succession of excellent standards before the "Barbarian Battle 2". A number of blockbuster mobile games are expected to drive further rapid growth. In terms of medium-and long-term driving forces, under the trend that the mobile game industry will continue to maintain rapid growth in the future, while the value of developers is further highlighted, the company is expected to rely on its own excellent R & D strength and innovative genes. continue to create differentiated high-quality mobile games works, so as to promote sustained growth in future performance.
We estimate that the company's operating income from 2020 to 2022 will be 1.447 billion yuan, an increase of 50.2%, 40.9% and 22.2% respectively over the same period last year. The net profit of the company will be 40.1%, 5.62% and 694 million respectively, an increase of 75.7%, 40.2% and 23.6%, respectively. The EPS is 1.64 and 2.30, respectively, and the corresponding PE is 25.0X/17.9X/14.5X. Maintain a "buy" rating.
Risk Tips:
1) the risk of a slowdown in the growth of the mobile game industry
2) the risk that cloud games do not develop as expected.
3) the risk that the company's new online games are not as expected by the market.
