Key points of investment
Incident: In 2023, the company achieved operating income of 4.307 billion yuan, an increase of 10.01% year on year; net profit to mother was 562 million yuan, an increase of 61.37% year on year. For every 10 shares, 9 yuan (tax included) will be distributed without transfer. With 2024Q1, the company achieved revenue of 982 million yuan, a year-on-year decrease of 17.38%; net profit to mother was 151 million yuan, a year-on-year decrease of 23.94%, mainly due to an increase in sales expenses due to adjustments in the company's overseas game business operating model.
Mobile gaming continues to gain strength, and the card industry is growing steadily. In terms of mobile games: During the reporting period, the company's mobile game business segment adhered to the boutique game development line. The domestic game products “Fishing at Your Fingertips” and “Fly the Sky” received enthusiastic support from players as versions were iterated. “Yao Ji Fishing 3D Edition” and “New Era of Fishing” also achieved steady growth since their launch, and the game business also won many awards from technology companies such as Xiaomi, Huawei, and Vivo. In terms of card business: During the reporting period, the company's poker business achieved cost reduction and efficiency through adjustments to the sales structure, and steady growth in performance. At the same time, the company is actively promoting the “construction project for a production base with an annual output of 600 million playing cards”. The new playing card production base is under steady construction, which is expected to further consolidate and enhance the company's market position.
Innovative marketing+going overseas is expected to open up new business formats. In terms of innovative Internet marketing business: During the reporting period, the company won many marketing case awards with many well-known enterprises based on years of intensive work in the marketing field and high-quality output of marketing ideas. As a long-term ecological partner of Jumbo Engine, the company helped several customers launch new tours based on its pioneering VTAM model, achieved good results, and was further certified as a “Gold Certified Service Provider” for Jumbo Engine. The results highlight the company's exploration of a new ecosystem and are expected to help the brand operate for a long time.
Investment advice: Mobile games are deeply involved in educational circuits, the card business has a stable moat, and innovative marketing is expected to enable long-term operation. We forecast that the company's revenue from 2024 to 2026 will be RMB 4.573 billion, RMB 4.857 billion and RMB 5.162 billion; net profit to mother will be RMB 691 million, RMB 756 million and RMB 833 million respectively; EPS will be 1.68, 1.83 and 2.02 yuan respectively; corresponding PE will be 14.6, 13.4, and 12.1, respectively; and maintain the “buy-A” proposal.
Risk warning: Game industry policy uncertainty, risk of macroeconomic fluctuations, game revenue falling short of expectations, etc.