Core ideas:
Performance profile: the company released three quarterly reports, Q3 achieved operating income of 440 million yuan in a single quarter, down 12.96% from the same period last year and 15% month-on-month. The gross profit was 325 million yuan, an increase of 11.98% over the same period last year, and the gross profit margin increased by 16.44pct to 73.83% over the same period last year. Mainly due to the change in accounting caliber, game marketing promotion expenses were transferred from operating costs to sales expenses. Q3 realized sales expenses of 140 million yuan (QoQ+123%) in a single quarter, and the sales expense rate increased by 19.69pct to 31.87% compared with the previous quarter. This is mainly due to the high star endorsement fees and channel delivery fees caused by the launched spontaneous product "True Red Blade", and the running water generated by it will be recognized as revenue one quarter behind. As a number of products have entered the volume distribution stage, the payment rate has increased to 23.48% compared with the same period last year.
Q3 achieved a net profit of 41.26 million yuan (YOY-69.19%) in a single quarter, deducting 105 million yuan (YOY-41.26%) in non-return net profit, and a non-recurrent loss of 64.13 million yuan, mainly due to changes in the fair value of other non-current financial assets.
The performance of blockbuster products is not as good as expected, and the performance of Q4 is still difficult to improve. In early August, the miracle product "True Red Blade" endorsed by Shen Teng was launched. As a leading product in the integration of company transportation, it is highly expected. The iOS bestseller ranking remained at 30,35th in the first week of launch, and the retention rate on the next day and 7th day was lower than expected. Advertising was stopped a week after launch, and the bestseller list continued to fall back to 150th at the end of September. According to Qimai data estimates, "True Red Blade" in August and October in the case of running water, Q continued to decline for 4 years. According to the lack of face less new than high-grade pressure on the line.
Investment advice: short-term performance is under downward pressure due to the lower-than-expected performance of the company's head products.
Key products for follow-up preparations include "Street bully: duel" (Tencent agent, expected to launch in November), "National Miracle 2" (12 launched from the moon master,) Teng, dark news on behalf of Dark Wind, A pre-PR G "Dark Tide", related games have been version numbers, are now making steady progress. We reduced the company's 20-22 net profit to 621, 830, 981 million yuan. Reference to the comparable company to give 2021 25x PE, corresponding to the reasonable value of 7.52 yuan per share. Maintain a "buy" rating.
Risk hint: version number risk, lower-than-expected risk, industry competition aggravating risk.