Incident: In 2023, the company achieved revenue of 4.307 billion yuan, +10.01% year-on-year, net profit to mother of 562 million yuan, +61.37% year-on-year, after deducting net profit of 519 million yuan without return to mother, +51.72% year-on-year. 2023Q4, the company achieved revenue of 735 million yuan, -33.22% year on year, net profit to mother of 0.05 billion yuan, -91.46% year on year, net profit of non-return to mother -204 million yuan, -106.02% year on year. 2024Q1, the company achieved revenue of 982 million yuan, -17.38% year on year, net profit to mother of 151 million yuan, -23.94% year on year, net profit without return to mother 150 million yuan, or -21.60% year on year.
The main business has performed steadily, and dividends have been strengthened. On the revenue side, in 2023, the company's poker business achieved revenue of 1,090 billion yuan/YoY -1.57%, the game business achieved revenue of 1,226 billion yuan/YoY +1.94%, and the digital marketing business achieved revenue of 1.912 billion yuan/YoY +24.90%. The year-on-year decline in 2024Q1 revenue was mainly due to the high base of last year. The flow of old games naturally declined. At the same time, the new product launched in 2023 was Chess+3 Match, which was a relatively small increase. In terms of cost, the gross profit margin in 2023 was 37.63%, -1.07pct year on year, mainly due to an increase in the share of revenue from digital marketing businesses with low gross margins. 2024Q1 gross margin was 37.8%, +3.6pcts year over year. In terms of costs, Big Fish Sports began gradually shifting to self-development in 2023Q4, and promotion expenses have increased. 2023Q4/2024Q1 sales expenses were 13.43%/7.29%, respectively, +8.71 pcts/+3.40 pcts compared to the same period, and subsequent profits will be released one after another. In 2023, the company plans to distribute cash dividends of RMB 9.00 (tax included) to all shareholders for every 10 shares, with a dividend ratio of 66%. At the same time, the company announced a shareholder return plan for the next three years (2024-2026). The profit distributed in cash in a single year is not less than 10% of the profit that can be distributed in cash in the last three years, and the profit distributed cumulatively in cash for the last three years is not less than 30% of the profit that can be distributed in the last three years.
The “Big Entertainment” development strategy continues to advance. In the game business, the company will continue to iterate and upgrade existing products, extend the life cycle of products, and actively develop new products and promote games overseas; the poker business, the “600 million playing card production base construction project with an annual output of 600 million decks” is progressing steadily to expand the production scale of the company's playing card business; the Internet innovation marketing business. The company pioneered the VTATM model, which fully empowers the long-term growth of the brand and actively lays out a global ecological marketing chain.
Investment advice: We expect the company to achieve revenue of 47.49/53.13/5.787 billion yuan in 2024-2026, +10.27%/+11.86%/+8.93%, net profit to mother of 6.87/7.88/ 898 million yuan, +22.17%/+14.63%/+14.02% year over year, corresponding PE of 14.92X/13.02X/11.42X, maintaining the “buy” rating.
Risk warning: New product launches fall short of expectations, industry competition intensifies, policy risks