Incident: The company released its 2023 annual report, achieving operating income of 3.389 billion yuan, YoY -1.2%; net loss to mother of 83 million yuan, adjusted net loss of 34 million yuan, year-on-year reduction of losses, and profit of 158 million yuan before adjusted interest, tax, depreciation and amortization.
TapTap's revenue has continued to grow rapidly, and online game payment rates have increased. In 2023, the company's information service business revenue was 1,297 billion yuan, an increase of 33% over the previous year. It benefited from the recovery of the game market, increased customer marketing demand, and the increase in the efficiency of the company's advertising system driven the advertising business revenue growth. The average number of monthly active users of the TapTap China app in 2023 was 35.81 million. Through several strategy adjustments from June to July, MAUs rebounded significantly. Among them, the average MAUs in 23Q4 exceeded the same period in 22 years. In 2023, the company's game business revenue was 2,092 billion yuan, down 14.7% year on year. The average monthly active users of online games were 12.45 million, down 23% year on year. Mainly because old games such as “Sausage Party” were affected by competition, MAUs and MPUs declined. The average monthly paying users were 1.31 million, and the payment rate increased 0.8 pct to 10.5% year over year.
The results of reducing costs and increasing efficiency are remarkable. The gross margin of the company's overall business in 2023 was 61.03%, up 7.54pct year on year. Among them, the gross margin of the game business increased 1.23pct to 46.67% year over year. Mainly due to the increase in revenue from relatively high-margin products such as “Firepower Soda” and “Torchlight: Infinite”, the gross margin of the information service business increased 10.49pct to 84.18% year on year. In 2023, the sales expense ratio was 25.53%, narrowing by 1.36 pcts year on year, and the R&D cost rate fell 7.45 pcts year over year to 29.97%, mainly due to personnel optimization.
“Let's Go Muffin” performed brilliantly, and self-developed products continued to be realized. The company's self-developed product “Let's Go Muffin” was launched in the Chinese Hong Kong, Macao and Taiwan markets in January of this year. According to Qimai statistics, “Sword of the Suzuran” has averaged the top 2 best-selling iOS games in the three regions since its launch, and has reached the top several times. The game is also scheduled to be launched in mainland China and other countries overseas this year. In addition, “Heartbeat Town” has more than 2 million reservations on the TAPTAP platform. It is planned to conduct paid testing in April, and it may be launched within the year.
Profit forecast: The company's net profit for 24/25/26 is expected to be 3.05/3.93/493 million yuan, reversing the year-on-year losses/ +29%/+26%, maintaining the “buy” rating.
Risk warning: The performance of self-developed games falls short of expectations; platform user growth slows down; policy risks