Event: the Soul Network (603258.SH) released its third quarterly report. From January to September 2020, the company achieved an operating income of 737 million yuan, an increase of 52.0% over the same period last year, and a net profit of 310 million yuan, an increase of 118.9% over the same period last year.
Main points of investment:
"Dream three Kingdoms" continue to stabilize the fundamentals, Q4 flow is expected to improve month-on-month.
The growth rate of the company's revenue and profit in the third quarter was lower than that in the first half of the year, mainly due to the consolidation of the mobile network in March 2019, the growth rate declined in the second half of the year at a high base, and the overall performance growth was in line with expectations.
The company's main PC game "Dream three Kingdoms" continues to contribute to stable flow, and has always remained at the top of the hot list on Tencent's WeGame platform. Looking forward to the fourth quarter, due to the relief of the domestic epidemic, the reopening of Internet cafes will boost the company's PC games. In addition, the company launched "Dream three Kingdoms" from September 26th to National Day.
The 10th anniversary activities and the opening of new services, Q4 "Dream three Kingdoms" PC game pipeline is expected to improve month-on-month, promoting the annual performance.
Q4 new game launch thickens Q4 running water, next year the new product reserve is rich.
The company launched the two-dimensional game "interpreter: X2" on October 22nd, TapTap downloads 270000 times in the first week of launch, iOS best-seller list ranked about 60, and it is expected to contribute 10 million levels of pipelining this year; November 4, "my chivalrous" launched, the product is released by Tencent agent, the internal test reputation is high, optimistic about the performance of the two games, thickening Q4 company's revenue and profit. Next year, the company's product reserve includes multiplayer competitive "Barbarian Battle 2" and "DC: peak Battlefield". The new games all have IP advantages, and the company is still in the performance cash period in the medium term.
The company is expected to achieve a net profit of 414 million yuan / 552 million yuan / 644 million yuan from 2020 to 2022.
It is estimated that the company will have an income of 1.368 billion yuan / 1.844 billion yuan / 2.237 billion yuan in 2022, with a net profit of 414 million yuan / 552 million yuan / 644 million yuan and an EPS of 1.70 yuan / 2.26 yuan / 2.64 yuan, respectively, and the corresponding PE will be 24.21, 18.15 and 15.56 times respectively, maintaining the "recommended" rating.
Risk hint
The game flow is not as expected; the game launch time is not as expected; the industry policy changes.
