Introduction to this report:
The company's performance increased dramatically in 23 years, and dividends were actively distributed. The company's convertible bond financing was implemented in 2024, and it is about to significantly expand the production capacity of playing cards. On the other hand, attention is being paid to the flexibility of the game business's profit contribution.
Key points of investment:
The company's production expansion is ongoing, game profits are stable, and the “gain” rating is maintained. We expect the company's EPS for 2024-2026 to be 1.57/1.86/2.20 yuan respectively, down from the previous forecast (2.35/2.66/none), mainly due to changes in the industry environment and the company's business pace. The target price was 31.31 yuan (previous value of 51.80 yuan), maintaining the “gain” rating compared to 20xPE in 2024.
On the evening of April 29, Yao Ji Technology released its 2023 annual report and 2024 quarterly report. The annual report announced a dividend of 0.9 yuan per share. The company's revenue for the full year of 2023 was 4.307 billion yuan, up 10.01% year on year, and net profit to mother was 562 million yuan, up 61.37% year on year. Q1 revenue in 2024 was 982 million yuan, down 17.38% year on year, and net profit to mother was 151 million yuan, down 23.94% year on year.
Mobile games are profitable, and marketing is growing rapidly. The company's mobile game business revenue was 1,226 billion yuan, up 1.94% year on year, and gross profit was 1,177 billion yuan, up 1.78% year on year, which contributed mainly to the performance. In terms of the digital marketing business, as a long-term ecological partner of massive engines, the company's pioneered VTATM model helped many customers achieve good results in launching new games, benefiting from the restoration of game versions and increased demand for new game product launches. The sector's revenue in '23 was 1.912 billion yuan, an increase of 24.9% over the previous year. The business is expected to maintain its growth momentum.
Convertible bond financing promotes the “annual output of 600 million playing cards” project to make up for insufficient production capacity. The company currently has a production capacity of 756 million cards per year, with a capacity utilization rate of over 120% in 2020-2022.
In the first quarter of this year, the company issued convertible bonds to raise 583 million yuan for the “construction of a production base with an annual output of 600 million playing cards”. The construction period is expected to be 3 years, which can increase production capacity by 79.37%. The company has recently begun investing in its wholly-owned subsidiary, Anhui Yaoji, to implement the fund-raising project.
Risk warning: Policy and regulatory risks, slow production expansion, insufficient game profits.