Event
In the morning, the company announced that Shanghai Junmeng (wholly-owned company) and Gravity authorized Relaternity to distribute the self-developed mobile game product "Wonderland Legend RO: the birth of a New Generation" in Hong Kong, Macao, Taiwan and Southeast Asia. Relaternity is a byte-beating affiliated company in Hong Kong. The agreement period shall remain in force for 2 years from the date of the formal commercial operation authorization of the game, and can be automatically renewed for 1 year upon expiration.
Brief comment
Whether it is a PC game or a mobile game, Wonderland Legend is a popular "Wonderland Legend: guardian Eternal Love" that has been proved to be online in the big IP,17 year. The company has obtained the exclusive development license of "Wonderland Legend" from Gravity, which has enough scarcity and imagination space. "the Legend of Wonderland: the birth of a New Generation" is a MMORPG game planned to be released in Hong Kong, Macao, Taiwan and Southeast Asia. This headline release proves the company's ability to develop popular style games. Making use of the strong channel distribution ability of the headlines, "the birth of the New Generation" is very likely to become a popular style. With reference to the "Guardian Eternal Love" jointly developed by the company and Xinxin, it has been online for two years and five months, with a total global flow of about 3.2 billion yuan. The average monthly flow is more than 100 million. In addition, the "Legend of Wonderland: love for the first time", which was launched in South Korea in July, also performed very well. We would like to emphasize that the company has the research and development ability of popular style games, around the Wonderland legend that IP may continue to produce new popular style works in the future to achieve a qualitative leap.
There is an inflection point in the growth of traditional business. The technical service business of communication network construction, benefiting from 5G construction, is expected to maintain rapid growth. In August 2019, the company established a joint venture subsidiary Zhongfu Technology with Guangdong CLP Great Wall to jointly expand EPC business in Smart City. The company is full of orders and is expected to contribute greater performance flexibility from this year.
In 2019, due to the stricter regulatory environment of the industry and the delay of product launch, the performance of Shanghai Junmeng and Mochka fell short of expectations, including a large impairment of goodwill, and the company lost 561 million yuan for the whole year. At its peak, the company's goodwill is about 1.2 billion. After this impairment, the company's goodwill balance is only 200 million. Shanghai Junmeng game business broke out and gained headlines, and the possibility of further goodwill impairment is relatively low. Superimposed 5G construction led to the growth of communication technology service business and EPC business, and the dilemma reversed clearly.
Profit forecast: considering the headline issue, we raised the company's performance forecast for next year. It is estimated that the net profit for 20-22 years will be 1.08,4.12 and 498 million yuan respectively, maintaining the "buy" rating.
Risk hint: the launch time of the game is not as expected, and the flow of the game is not as expected.
