Main points of investment:
From the traditional car model company to the entertainment industry transformation, games + sports two-wheel drive. The company's traditional business is the car model toy business. In 2013-2014, it acquired Changyu World and Tiantuo Technology, entered the game industry, and acquired the Royal Spaniard Club in 2016 to lay out the sports field. At present, the company's business mainly includes games, sports and toys. From the perspective of revenue and profit, the operation of the company's traditional toy business tends to be stable, and the game and sports business in the layout of the pan-entertainment industry has become the company's core business. promote the continuous improvement of the company's profitability.
Focus on the research and development of boutique games, the game out to sea has become a new growth point of performance. The company has a rich reserve of IP resources and game research and development, distribution, operation of the whole industry chain, has developed a number of boutique games. The company's self-developed strategic game "Bawangzhiye" and the second-dimensional mobile game "Cang Zhi era" have a stable performance, in which the overseas version of "Bawangzhiye", "three Kingdoms M", has excellent performance, and the company's overseas game revenue is growing at a high speed. It has become a new growth point of the company's game business. The company already has strong issuing ability and experience in SLG, two-dimensional subdivision of game categories, and plans to launch many kinds of SLG and second-generation mobile games such as "return to Civilization" and "King of Doom" (which has won the version number) in the future. We believe that the overall flow of the game business is expected to continue to grow.
The transfer of Wu Lei to the Spaniard has caused a "Wulei effect" and the Spaniard will return to Europe next season. In January this year, the official transfer of Wulei to the Royal Spaniard caused a "Wulei effect", which made the company and the club get a lot of attention at home. The company further signed Wu Lei as the global exclusive spokesman for Xinghui games and Xinghui toys, and gradually achieved synergy among various businesses. The Spaniard club ranked seventh in La Liga this season and regained its place in the Europa League qualifier after 13 years, we think the club's television revenue is expected to achieve high growth.
In addition, the Spaniard Club has opened three football colleges in Hunan, Shandong and Shanghai, and reached a strategic cooperation with Beijing Sangao Football School to promote the development of the domestic youth training system.
Profit forecast and valuation analysis. We believe that the company's core game products "The Legend Of Three Kingdoms" and "Cangzhi era" have a relatively stable performance, which is conducive to contributing stable cash flow and profits to the company. In the future, with the launch of new products such as "return to Civilization" and "King of Doom" (both have version numbers), the overall flow of the company is expected to continue to rise.
With the successful transfer of Chinese player Wu Lei, the attention and domestic influence of the Spaniard club are expected to continue to rise in the future, and the huge flow value is expected to strengthen the coordination between the company's sports sector and toy and game business. improve the company's overall profitability. We estimate that the EPS of the company in 2019-2021 is 0.24,0.31 and 0.40 yuan. With reference to the comparable company valuation, we give the company 20-25 times dynamic PE in 2019, corresponding to a reasonable value range of 4.80-6.00 yuan per share, giving the company a better rating than the big city for the first time.
Risk tips: new game development and operational risks; game going out to sea is not as expected; football club management is not as expected.