The company released the 2023 annual report and the 2024 quarterly report: (1) The company achieved operating income of 1,329 billion yuan in 2023, a year-on-year decrease of 19.84%, and net profit to mother of 169 million yuan, a year-on-year decrease of 23.81%. Excluding the impact of equity incentive expenses, net profit to the mother in 2023 was 195 million yuan, a year-on-year decrease of 16.60% under the same caliber. The company's net profit withheld from mother was 161 million yuan, a year-on-year decrease of 26.55%. (2) The company achieved operating income of 254 million yuan in 24Q1, a year-on-year decrease of 40.96%, a year-on-year decrease of 14.24 million yuan, a year-on-year decrease of 80.63%, after deducting non-return net profit of 9.84 million yuan, a year-on-year decrease of 86.04%.
We have a rich stock of new products, and pay attention to the progress of music and social networking. The company's IP operating product “Age of Discovery:
“Sea Overlord” is expected to be officially launched in 2024. Among the released products, the company has launched the fighting game “Star Wings”, and is expected to launch the applet game “Zero Domain Fantasy” and the Steam indie game “The Legend of Living Man” in the second quarter; the key card mobile game “Sword and Knights” is expected to be launched in the third quarter.
Furthermore, the company's blockbuster product “Dynasty Warriors 8” is expected to advance testing in 2024. The new music social networking product “GiMak” has launched an AI lab function, combining AIGC with music social networking to provide a variety of music gameplay including Lianmai, K-song chorus/song practice, AI sound evolution, reasoning social games, and voice chat. In the future, it is expected that emerging gameplay such as AI virtual person creation and AI music creation will be further expanded to enrich the user experience.
Profit forecasting and investment advice. The company is rich in new game reserves, and the launch is expected to drive performance growth. The social product matrix is rich, and the commercial implementation of “Give Mai” is expected to improve the monetization capacity of social products.
The company's revenue for 2024-2026 is estimated to be 14.56/22.15/2,859 billion yuan, with year-on-year growth rates of 9.6%/52.1%/29.1%, respectively; the company's net profit to mother is 1.87/2.82/396 billion yuan, respectively, up 10.2%/51.3%/40.4% year-on-year respectively. Using the segmented valuation method, the game business and the online advertising and value-added service business were separately valued. Referring to comparable companies, a reasonable value of the company was obtained at 15.80 yuan/share. Maintain a “buy” rating.
Risk warning. Product launches fell short of expectations, IP cooperation risks, and strengthened AIGC regulations.