Core views:
Incident: Huali Technology released the 23A&24Q1 financial report. In 2023, Huali Technology achieved revenue of 816 million yuan, an increase of 34.97%; net profit to mother was 51.96 million yuan, turning a year-on-year loss into a profit; net profit of 52.24 million yuan after deducting non-return to mother, turning a year-on-year loss into a profit. Net cash flow from operating activities was $252 million, a significant increase over the previous year. Looking at a single quarter, in 23Q4, the company achieved revenue of 221 million yuan, an increase of 57.99%; net profit to mother was 7.26 million yuan, net profit not to mother was 7.38 million yuan, turning a loss into a profit over the previous year. In 24Q1, the company achieved revenue of 215 million yuan, an increase of 37.60%, mainly driven by revenue growth from gaming and amusement equipment and card machines; net profit to mother of 1998 million yuan, an increase of 247.51%; net profit after deducting non-return to mother of 1.65 million yuan, an increase of 242.79%.
By business: Overseas markets have been further expanded, and new and old products continue to expand in the card machine business.
In 2023, game and amusement equipment sales revenue was 398 million yuan, up 27.28%, of which overseas sales revenue reached 100 million yuan; sales revenue of anime IP derivatives was 259 million yuan, up 75.64%, mainly driven by products such as Pokémon, Altman, and Minecraft; playground operating business revenue was 107 million yuan, up 13.81%. The gross profit level improved significantly year-on-year, and the management strategy was continuously adjusted and optimized; equipment cooperative operation was 23.85 million yuan, up 6.86% from the same period. In 24Q1, game and amusement equipment sales revenue was 105 million yuan, up 68.99%; sales of anime IP derivatives were 73.94 million yuan, up 63.67%; playground operation was 23.7 million yuan, down 8.61%; and equipment cooperation operation was 8.68 million yuan, up 27.53%. The company plans to distribute 2.0 yuan for every 10 shares, for a total cash dividend of 293.384 million yuan, accounting for 56.5% of the current year's profit.
Profit forecasting and investment advice. Considering the pace of consumption recovery, we expect the company's 24/25 revenue to be $976/1,134 million yuan, respectively, and net profit to mother of $0.71/106 million yuan. Amusement equipment sales expanded in 24 years, animation IP derivative products continued to expand, and profits are expected to be released rapidly. Based on the company's leading position and channel advantages, refer to comparable companies to maintain the company's 24-year 45X PE, corresponding to a reasonable value of 21.86 yuan/share, maintaining a “buy” rating.
Risk warning. (1) Offline game arcade regulations are getting stricter; (2) goodwill impairment; (3) card machine installation speed falls short of expectations.