23Q2 has achieved high month-on-month growth, and dividends show confidence in development.
23H1 realized revenue of 1.443 billion yuan, an increase of 35.68% over the same period last year, and a net profit of 660 million yuan, an increase of 32.95% over the same period last year. Deducting the non-return net profit of 691 million yuan, an increase of 16.92% over the same period last year, non-profit and loss mainly resulted in a loss of 54.57 million yuan caused by changes in the fair value of financial assets. 23Q2 realized revenue of 936 million yuan, an increase of 93.58% over the same period last year, an increase of 84.41% over the previous month, and a net profit of 419 million yuan, an increase of 83.57% and 71.10% over the same period last year. The sales cost of 23Q2 is 360 million yuan (200 million yuan for 23Q1 and 63.62 million yuan for 22Q2), and the sales expense rate increases 25.4pct compared with the same period last year, mainly due to the increase in online promotion expenses of "original journey". At the same time, the company issued a profit distribution plan for every 10 shares with a cash dividend of 1.30 yuan (including tax) and 0 bonus shares (including tax) without increasing share capital by provident fund.
The incremental contribution of the core new product "original journey" is significant, and the operation of the mature product line is stable.
"original Journey" was officially launched on March 24, and reached the top 20 of the iOS Free list and Best seller list on the first day, with more than 10 million running water on the first day, over 300 million running water in the first month, and more than 1 billion running water in the first month. Q2 contributed income and profit increment.
At the same time, the mature product line remains robust through fine operation. "Journey" series of products continue to optimize the version of the game, stabilize the number of players and income level. And through the journey IP all-department carnival and "journey national indifference competition competition" and other activities to attract users back. "Ball masterpiece" maintains the overall product popularity through a number of cross-border cultural linkage, the summer "Ball eighth Anniversary Music Festival" and other activities. In addition, as of July 31, 2023, the cumulative number of new users of "Space Action" in all channels has reached 28 million, DAU has exceeded 2.5 million, and the current trend of cross-border Douyin has been light and diffuse. IP "Rabbit Entrepreneurship" has successfully broken the circle of users.
Follow-up product innovation + version expansion will create a long-term operation of the production line.
1) the company will maintain its investment in version research and development, and plans to launch a version "original Journey-official version" with a better functional experience in the fourth quarter, as well as a "original Journey" Mini Program version to realize the interconnection between Mini Program and APP servers. 2) "Space Action" will continue to focus on content, with IP as the starting point, focus on continuous investment around video authors and PGC official high-quality content marketing, strengthen the construction of social ecology, and achieve the goal of "content + social" driving user increment. 3) the company expects "Super Sus" to officially start testing in North America in the second half of 2023. In addition, the company's first mobile game for the global market, "the throne without owner", debuted at ChinaJoy, focusing on the medieval magic theme MMORPG, which is expected to promote overseas market expansion.
Investment advice: the company's mature production line operation is sound, follow-up products continue to iterate + version expansion is expected to contribute to the increment, while actively layout AI, the use of "game + AI" to enhance user experience, innovative game play, the current "Space Action" launched the "AI reasoning Little Theatre", not Baidu, Inc., BABA, MiniMax and many other big surprise model to explore the "game + AI" solution. We expect the company to achieve a net profit of 1.314 billion yuan in 2023-2025, corresponding to 21/18/15xPE, and maintain the "recommended" rating.
Risk tips: the risk of a large decline in the stock of games, the launch of new games and the risk of underperforming expectations.