Incident: Gigbit announced 24Q1 results on April 23. The company achieved revenue of 927 million yuan in 24Q1, down 18.97% year on year, up 5.60% month on month; net profit to mother was 253 million yuan, down 17.35% year on year, down 4.68% month on month; deducted 198 million yuan of non-net profit, down 29.45% year on year.
The steady flow of core products and the launch of new products led to a month-on-month increase in the company's revenue. The company's 24Q1 revenue gradually stabilized, up 5.60% month-on-month, down 18.97% year-on-year. We believe that the main reason is (1) “Ask Mobile Games” and “Never Monster Cry (European and American)” sales volume of the above two games naturally declined year-on-year due to the life cycle, but driven by long-term operations and related activities, the 24Q1 sales volume of the above two games achieved a slight month-on-month increase, and the ranking of iOS game bestsellers also rebounded; (2) The company launched “The Immortal Family”, “Flying Dragon Riders (Overseas Edition)”, and “Never Monster Cry (European and American versions)” Waiting for game contributions Incremental; however, due to the need to defer confirmation of game revenue, the balance of recharges and items not yet amortized by the company increased by 88 million yuan compared to the end of 23.
Profits are under pressure due to the increase in the launch of new games, so pay attention to the subsequent recycling of new games. The company achieved net profit of 253 million yuan in 24Q1, down 17% year on year and 5% month on month; we believe that the main reason was (1) the company's rates increased during the period. 24Q1 sales/R&D expenses rates were 31.67%/20.03%, +0.70/+4.79pct year over year, and +5.80/+5.51pct month-on-month; (2) the profit contribution of the company's online games naturally declined and some newly launched games in 24Q1 were still in a state of loss due to mismatches in revenue and expenses. In addition, the company achieved adjusted net profit of 191 million yuan in 24Q1, a decrease of 33.54%; however, if factors such as deferred revenue and declining government subsidies were excluded, the decline in the company's adjusted net profit would be drastically narrowed to 14%.
Looking backwards, pay attention to changes in core game distribution and the launch of new games. Looking backwards, we believe that the increase in the company's performance is mainly due to (1) the increase in turnover brought about by the “Ask Me Mobile Game” 8th anniversary event; (2) the launch of various new games in 23Q4/24Q1, which will gradually enter the recycling cycle to increase the company's profits; (3) new games have been launched one after another, such as “One Piece of the Dragon: Dream Guide”, and “100 Million Light Years”. In addition, the company also has “Code M72” and “Legend of the Sword” “Strongest Sword”. “Castle”, “Code M11”, etc., self-developed/agency product reserves are relatively comparable Abundant.
Investment advice: We expect the company to achieve revenue of 42.19/45.18/4.749 billion yuan in 2024-2026; net profit to mother of 10.80/11.89/1,261 billion yuan; corresponding PE of 11.5/10.5/9.9 times, respectively. The company's new products are about to enter the recycling cycle, and old games are gradually stabilizing, maintaining a “buy” rating.
Risk warning: Product flow falls short of expectations; launch progress falls short of expectations; economic recovery falls short of expectations; industry policy changes.