The income in the second half of 20 years is in line with our expectations, but the adjusted net profit is lower than our expectations.
Non-game business is expected to become the growth driver of the company in 2021.
Maintain the buy rating; keep the target price unchanged at HK $4.4
Cross-platform games are expected to get through online and offline traffic.
In the second half of 20 years, the total revenue of Dream World accelerated by + 19% compared with the same period last year (+ 11% in the first half of 20 years), reaching 1.6 billion yuan, which is in line with our expectations. Game revenue accelerated year-on-year growth of + 20% (+ 10% in the first half of 20 years) to 1.4 billion yuan in the second half of the year, mainly due to: 1) the low base effect in the second half of 19 years; 2) the steady performance of head games "Dream Garden", "Dream Home" and "National Championship Football"; and 3) incremental income from the new game "Global Action". Looking ahead, the company's game reserve includes different categories of games, including "Little Animal Star" (leisure competition; expected to be launched in the second quarter of 21), "Glory all-Star" (Quadratic; expected to launch in the second half of 21), "Black Survivor" (MOBA/ Chicken eating; has not yet obtained a version number), Witch Diaries (eliminated; expected to launch in 22 years), and "Karabichu".
(two-dimensional shooting), which is expected to bring additional revenue contribution to the company. It is worth mentioning that "Little Animal Star" and "Black Survivor" are the company's first attempts at cross-platform games, and are expected to combine the company's gaming business with offline entertainment ecology to better get through online and offline traffic. Currently, we expect revenue from the gaming business to grow by 12% year-on-year in 2021.
SaaS platform is expected to promote the revenue growth of information service business.
The growth rate of information services revenue (including SaaS business and in-game advertising) slowed to + 8 per cent year-on-year in the second half of the year (+ 25 per cent in the first half of 20 years) to 185 million yuan, mainly due to the return of traffic from online games to normal. With the help of the standardized mid-Taiwan technology accumulated in its own game research and development process, the company has provided more than 300 industry customers with a variety of SaaS tools to improve the efficiency in traffic acquisition, user operation, liquidity and data analysis. As a result, we believe that the fast-growing SaaS business is expected to accelerate year-on-year growth of information services revenue by + 18% in 2021. In the second half of 20 years, other business income rose 284 per cent year-on-year (- 62 per cent in the first half of 20 years) to 17.32 million yuan, with the strong recovery partly due to an increase in consumer offline activity after the epidemic.
In 2021, based on a more optimized business model, the company plans to strengthen its cooperation with Tencent, opening 30 direct offline stores under the "play together" brand (including good time Movie Club offline stores and QQ Family theme stores), and further turning the business into a new offline interaction scene for young consumers.
Maintain the buy rating; keep the target price unchanged at HK $4.4
Gross profit margin fell to 40.2% month-on-quarter in the quarter, mainly due to a decline in the revenue contribution of the high-margin "magic baby". The operating profit margin fell 52.5 percentage points to-39.7% compared with the same period last year, mainly due to: 1) the decline in the performance of "Magic Baby" and the failure of the new game to bring considerable revenue contribution, which impaired the goodwill of Shanghai Fire Soul; 2) the non-recurrent impairment provision resulting from part of the game licensing fees and the share of prepaid income to content developers, the management expense rate increased by 6.2 percentage points year-on-year to 15.3%. And 3) the company's continuous improvement in game self-research capability, as well as investment in SaaS products, led to a 6.1% year-on-year increase in R & D spending to 13.1%. The adjusted net loss attributable to shareholders reached 26 million yuan. Looking to the future, we will adjust the forecast revenue of Dreamland 21max 22-0.5% Universe-1.0%, and adjust the adjusted net profit for the same period-1.8% Mather 6.4%. To reflect: 1) more conservative expectations for the information services business; and 2) estimates for higher R & D spending rates. We maintain our buy rating and keep our target price unchanged at HK $4.4. Our target price corresponds to 11 times the forecast price-to-earnings ratio for FY21.