Company news
The company released its report for the third quarter of 2020. The company achieved revenue of 737 million yuan in the first three quarters, an increase of 51.95% over the previous year; the net profit of the mother was 310 million yuan, an increase of 118.89% over the previous year.
Comment on the matter
Performance was in line with expectations, and deferred revenue increased further month-on-month
The company achieved revenue of 262 million yuan in Q3 in a single quarter, up 37.05% year on year and 12.71% month on month, and continued to grow rapidly; Guimu's net profit increased 77.47% year on year, which was basically the same from month to month. The increase in the company's performance mainly benefited from: 1. After the “Dream Three Kingdoms” mobile game was connected to the Wegame platform, revenue increased year-on-year; 2. The “Dream Three Kingdoms” reset mobile game was launched for more than 1 year, and every minor version update was still in the top 60-80 of the iOS bestseller list, with relatively stable performance; 3. The overall performance of Yudong Network, which was the target of the acquisition, was good, completing 60% of the annual performance bet in the first half of the year alone. The company's contract debt at the end of the third quarter was 403 million yuan, an increase of 14% over the previous quarter. The increase is expected to be due to the 10th anniversary of the launch of the “Dream Three Kingdoms” mobile game, and an increase in deferred revenue related to the game. The increase in revenue from the “Dream Three Kingdoms” mobile game anniversary is expected to be further reflected in Q4.
Entering a period of intensive launch of new products, which is expected to bring about a considerable increase in performance, “Dementor”, one of the company's key products this year, was launched on October 22. Currently, the game remains around the top 50 iOS bestsellers list. “Dementor” once faced a word-of-mouth crisis during the testing phase, and the company's R&D team quickly responded to players' feedback and made extensive adjustments to the game copy in just a few months, reflecting the company's R&D team's strong execution ability and the company's user-first business philosophy. Another of the company's key products, “My Knight”, is expected to be launched on November 4. The number of subscribers on the game's official website has exceeded one million, and the number of Taptap subscribers has exceeded 500,000. Market expectations are high. In addition to the above two games, the company also has “DC:
There are many games such as “Pinnacle Battlefield”, “Energy Lost Control”, “Spiral Warriors”, and “Battle Barbarian 2”.
Profit forecasting and valuation
We are optimistic about the company's future development. The mobile game and mobile game versions of the leading product “Dream Three Kingdoms” can still maintain strong vitality. The launch of new premium games such as “My Knight” is expected to bring considerable performance flexibility to the company in the future. Net profit attributable to shareholders of the parent company in 2020-2022 is expected to be 417 million yuan, 548 million yuan and 664 million yuan respectively, EPS is 1.71 yuan 2.25 yuan and 2.72 yuan respectively, and the corresponding PE is 24.74, 18.82 and 15.53 times. Maintain the “Cautious Increase in Wealth” rating over the next 6 months.
Risk warning
The progress or flow of the launch of new games falls short of expectations; the life cycle of old games falls short of expectations; industry competition intensifies; policy risks
