Event: the company announced 20Q3 results: 20Q3 single-quarter revenue of 260 million yuan (YOY+37.2%), return to the mother net profit of 100 million yuan (YOY+78.6%), home deduction of non-net profit of 80 million yuan (YOY+46.2%).
Comments:
1, 20Q3 company revenue and profit end growth is considerable, "Dream three Kingdoms" PC games, "Dream three Kingdoms" mobile games copy and mobile network and thickening performance. ① 20Q1-Q3 has revenue of 740 million yuan (YOY+52.0%), net profit of 310 million yuan (YOY+ 118.9%), non-net profit of 250 million yuan (YOY+96.3%) and net operating cash flow of 450 million yuan (YOY+102.7%). 20Q3's quarterly revenue is 260 million yuan (YOY+37.2%), its net profit is 100 million yuan (YOY+78.6%), and its non-net profit is 80 million yuan (YOY+46.2%). ② 20Q3's overall gross profit margin was 87.55%, which was higher than the same period last year. The PC game of "Dream three Kingdoms" and the duplicate version of "Dream three Kingdoms" mobile games operated well, the income increased, and the subsidiary mobile network thickened its performance. The overall net profit margin was 38.74%, which increased 9.45pct compared with the same period last year. The sales expense rate of 20Q3 Company was 27.10%, which decreased 1.7pct compared with the same period last year and increased 8.13pct compared with the previous year. Mainly due to the company's core product "Dream three Kingdoms"
PC games and mobile games copy version of the anniversary celebration activities generate promotion preheating fees. The R & D expenditure rate is 16.79%, which is higher than the same period last year. The trend of industry content is highlighted, and the company pays more attention to R & D investment. Q3 non-recurring profit and loss mainly comes from the increase in government subsidies related to revenue received by the company during the reporting period and the increase in income from wealth management products purchased by the company with idle funds. In March 2019, the company acquired 80% equity interest in Xiamen Mobile Network for 289 million yuan. The underlying promise is that the non-net profit deducted by the parent from 2019 to 2021 will not be less than 6000 million yuan, and the total amount will not be less than 182 million yuan.
2, 20Q3 "Dream three Kingdoms" PC games and mobile games copy version respectively launched the anniversary celebration activities, players responded well, Q4 new products focus on the launch is worth looking forward to. The PC game of ① "Dream three Kingdoms" was launched on Tencent Wegame platform in January 20, effectively expanding the user base. The 10th anniversary celebration began on September 26, with offline players meeting in parallel with online activities, launching a rich gift package and opening a new 10th anniversary suit, "Wolong out of the abyss". The players' sense of identity was significantly enhanced, and the popularity of the game reached its peak again. The reprinted version of ② 's "Dream three Kingdoms" mobile game officially opened its anniversary on July 14, when the game entered the 39th best-seller list, and a new feature film "the Dark Night" was launched on August 20, helping the game to climb again. ③ company pays attention to the research and development ability of new themes and new categories of mobile games. 10.22Quadratic Roguelite new game "God Solver" enters the free list Top3 as soon as it is online on the whole platform, and its art style and innovative ways of play are well received by users. 20Q4 reserve "my chivalry" (retro martial arts sandboxie RPG/ Tencent Aurora Mobile Limited plan only / existing version / 11.4 online) and "Yuan Neng out of control" mobile game (Roguelike dungeon adventure / spark studio development, soul network agent / existing version number). ④ as of 10.28, "my chivalrous" official website reservation more than 109 weeks, TapTap reservation more than 50 weeks, TapTap score 8.7.
3. Profit forecast and investment rating: the company started with PC-end games, focused on boutique research and development, and expanded to mobile games, VR games, etc., a number of co-founders from Tencent, is still actively involved in the front line of business. Since 2019, the performance has returned to the growth track, and in 2020, the company has polished a number of boutique new games, the market expectation is high, and the field of mobile games is expected to usher in a new breakthrough.
We estimate that the return net profit from 2020 to 2022 will be RMB 424,000,000,000,000 respectively, and the corresponding PE will be 24Universe 16x13x respectively, maintaining the "recommended" rating.
Risk tips: the life cycle of old products is not as expected, the launch progress and performance of new products is not as expected, industry competition is further intensified, user acquisition costs are increased, core brain drain, corporate governance risks, market style switching and so on.