The company will issue 580 million yuan of convertible bonds to invest in a poker production base project to maintain a “buy” rating. On January 24, 2024, the company announced the “Instructions for Issuing Convertible Corporate Bonds to Unspecified Targets”, which will issue a total of RMB 583.1273 million in convertible corporate bonds. After deducting issuance fees, the raised capital will be invested in a project to build a production base with an annual output of 600 million playing cards. We believe that the implementation of this distribution and fundraising project is expected to improve the company's playing card production efficiency and product quality, further consolidate its leading position in the market, and help ease the company's financial pressure, optimize its balance and liability structure, improve profitability, and promote sustainable development.
According to the company's 2023 annual performance forecast, in 2023, the company is expected to achieve net profit of 53-650 million yuan (up 52%-86% year on year), net profit without return to mother of 5-6 billion yuan (year-on-year increase of 46%-75%), 2023Q4 will achieve net profit to mother -0.27 billion yuan to 93 million yuan, and net profit from non-return to mother -0.23 million yuan to 77 million yuan. Based on the company's performance forecast and business expectations, we lowered our 2023-2025 profit forecast. We expect the company's 2023/2024/2025 net profit to be 6.06/8.11/963 million yuan (previous value was 7.49/8.98/10.17), corresponding EPS was 1.47/1.97/2.34 yuan respectively, and the PE corresponding to the current stock price is 15.0/11.2/9.5 times, respectively. We are optimistic that the company's playing cards and game business will continue to improve, continue to drive the company's performance growth and maintain “purchases” ” Ratings.
The game business driven a sharp increase in the company's performance in 2023. The growth trend or continuation of the company's 2023 performance growth was mainly due to the game sector, which optimized the player experience with continuous product changes. At the same time, the company optimized game launch promotion strategies and rationally arranged the pace of launch. The decline in game promotion expenses during the reporting period compared to the same period in 2022 led to profit growth. Fluctuations in 2023Q4's performance are mainly affected by depreciation of long-term assets such as long-term equity investment and goodwill, or changes in long-term performance growth trends.
The poker and game business continues to improve, continuing to help the company grow in the long term (1) The playing card business operates steadily, benefiting from unit price increases, and profits are expected to continue to increase. As the company's poker production base project is put into operation, production capacity will expand, and market share is expected to increase further. (2) The company's core games in the fishing category performed steadily. The core games “Fishing Boom” and “Fingertip Fishing” basically remained in the top 150 iOS bestsellers, and the profit increase effect brought about by the optimization of marketing strategies was obvious. We expect that with continuous optimization of the release, the company's core games are expected to continue to perform steadily and continue to drive the company's performance growth.
Risk warning: Game flow is declining, poker sales are declining, digital marketing business is recovering less than expected, etc.