Description of the event
Gigbit revealed its 2024 quarterly report. In 24Q1, the company achieved revenue of 927 million yuan (-19.0% y/month-on-month +5.6%), realized net profit to mother of 253 million yuan (-17.4% /month-on-month -4.7%), and realized deduction of 198 million yuan in non-net profit.
Incident comments
Sales of key products rebounded month-on-month, with 24Q1 revenue returning to the month-on-month growth range 1) The Q1 core product “Ask Me Mobile Game” launched an anniversary event. The two core products 24Q1 sales increased month-on-month, but the year-on-year decline in sales of the above products caused the company's Q1 revenue to fall year on year; 2) the new products “Immortal Family”, “Flying Dragon Riders (Overseas Edition)”, “Shenzhou Thousand Foods”, “Monster Never Cry (European and American version)” “Outpost: Infinity: Infinity: Infinity Siege 》Contributing incremental revenue; 3) Due to the recovery in core product sales and the increase in the contribution of some newly launched mobile games, the total balance of recharges and items not amortized by the company as of 2024.3.31 was 529 million yuan, an increase of about 88 million yuan over 2023.12.31.
Version updates and new game launches led to an increase in sales, and R&D personnel continued to invest 1) Sales expenses increased by 67 million to 294 million month-on-month due to the launch of several new products and continuous iteration of existing games, which also led to a sales expense ratio of +0.7 pct/month-on-month +5.8 pct to 31.7%; 2) Active progress in new product development and continuous personnel investment. The average monthly number of people in 24Q1 was +14% to 1,472 people, driving R&D expenses +6.5% year over month; 3) and Exchange rate fluctuations had an impact on Q1 results. In addition, an increase in amortization balances of about 88 million yuan and a year-on-year decrease of nearly 20 million yuan in government subsidies also had a negative impact on Q1 results.
The performance of the core product 24Q1 was stable and improved month-on-month. Focus on the subsequent flow trends of core products and the pace of new product launches and performance implementation in '24
1) Influenced by factors such as the operation activities of the new version, “Ask Me Mobile Game” and “One Thought at a Time” 24Q1 performance and achieved a month-on-month recovery. It is expected that stock products will continue to release performance under long-term operation and cost optimization; 2) “Immortal Family,” “Fly Dragon Knight (overseas version),” “Monster Cry Never (European and American version),” and “Outpost: Infinity Siege” are expected to increase in Q2 and subsequent performance due to factors such as initial launch or not yet achieved profit;
3) In terms of product reserves, products such as “Legend of the Origin of Another World: Slime Doesn't Cry” (codename Origin) have recently been approved. “ONE PIECE: Dream Pointer” was launched at the beginning of the month, the video game “Rhythm Trajectory” is set to 4.29, “One Hundred Million Light Years” (expected to launch in mainland China in the second half of 2024), and “Legend of the Sword and Sword (code M88)”, etc., are also planned to launch various reserve games such as “M72” and “M11” with a Western fantasy theme.
Profit forecast and investment advice: We expect the company's net profit to be 1.07 billion/1.26 billion in 2024/2025, respectively, corresponding to 11.6/9.9 times PE, maintaining the purchase rating.
Risk warning
1. Risk that product version approval, launch progress and flow performance fall short of expectations; 2. Industry regulatory risks.