2023H1 substantially reversed losses compared with the same period last year, optimistic about the launch performance of the new game, and maintained the "buy" rating company to issue a mid-term performance forecast for 2023. 2023H1 is expected to achieve a net profit of 3500-55 million yuan (a loss of 222 million yuan for 2022H1 in the same period), and an adjusted net profit of 1.9-215 million yuan (a loss of 51 million yuan for 2022H1 in the same period). Both net profit and adjusted net profit turned into profit over the same period last year. Main departments: (1) the company continues to deepen its user operations by using Fanbook, its own channel revenue increases, and its gross profit margin increases. (2) the company continues to improve customer acquisition efficiency and refined operations, resulting in a significant reduction in marketing costs; (3) cost reduction and efficiency measures lead to a decline in general and administrative expenses; and (4) the split of IP derivatives business reduces the impact on operating losses. Based on the expectation of the company's new game products, we raise our profit forecast for 2023-2024 and lower our profit forecast for 2025. It is estimated that the net return profit of the company in 2023-2025 will be 2.50 pound 5.29 pound 7.02 million (1.95pm 4.11 shock 7.46 million before 2023-2025), the corresponding EPS is 0.2pm 0.3pm 0.4 respectively, and the current stock price corresponds to 18.4pm 8.7pm 6.5 times respectively. We are optimistic about the company's new game launch performance and maintain the "buy" rating.
With the spin-off of IP derivatives business, the company's operating cash flow has greatly improved. The company expects the net cash flow of 2023H1 operating activities to be 2.3-250 million yuan (an increase of 9326.2% mi 10145.9% compared with the same period last year). The cash flow of operating activities has improved significantly, or due to the company's spin-off of IP derivatives business, reducing cash outflow, while the company's game products have performed steadily, contributing to a stable cash flow. We believe that the spin-off of IP derivatives business is more conducive to the company's concentration of superior resources to ensure that self-developed games to achieve high-quality online, while the company's cash flow will continue to improve, providing more space for the company's business development.
The launch of the self-research game is expected to drive the company's performance growth; Fanbook combined with AIGC may bring experience change the company's self-developed game "Karabichu" PC version has been launched on August 3, the user response is enthusiastic, "Karabichu"
The launch of the mobile game version and "two countries: the staggered World" is expected to lead to the improvement of the company's gross profit margin and the continuous repair of its performance. By 2022, the number of Fanbook users has exceeded 10 million, the number of daily active users has exceeded 1 million, and the number of users of multiple servers has exceeded 1 million. A number of games have set up user communities in Fanbook, helping to improve the stickiness of stock users and prolong the life cycle of the game. In addition, the company has actively promoted the landing of AIGC technology, and has connected a variety of AIGC tools in Fanbook to enable community content creation scenes. We believe that Fanbook, combined with AIGC technology, is expected to bring about changes in user experience and help the company's products achieve long-term operations and increase gross profit margins.
Risk tips: the new game launch performance is not as expected, Fanbook user growth or commercialization is not as expected and so on.