Events:
The company released its financial results for 2020: the company's annual income was 1.209 billion yuan (year-on-year + 0.3%), gross profit was 926 million yuan (year-on-year + 4.1%), and adjusted net profit was 219 million yuan (year-on-year-38.3%). Net profit adjustment mainly includes changes in fair value of convertible redeemable preferred shares (857 million), listing fees and so on.
Comments:
In the short term, product delays overlay the expansion of the R & D team, resulting in performance pressure, while R & D hard power is further consolidated in the long run. The company's adjusted net profit fell by 38.3% to 219 million yuan, mainly due to 1) the company's two products, "under Hongtu" and "Dream New World", which were originally planned to launch in 2020, were postponed to some extent to 20Q4 and 21Q1 respectively, so Xinyou made a limited contribution to its annual performance in 2020. 2) the expansion of the R & D team in 2020 led to an increase in R & D costs, with an increase of 458 new personnel (about 389 new R & D personnel), accounting for 87% of the R & D personnel, and the annual R & D cost increased by 38.8% to 540 million yuan. In the short term, product delay and high growth in early R & D investment put pressure on performance in the short term, but in the long run, the high R & D investment lays a solid foundation for the expansion of the company's diversified categories and the improvement of engine strength (UE4, UE5).
"Dragon Raja" promotes the overall performance of going out to sea, and strengthens the global layout based on the integrated mode of research and transportation. "Dragon Raja" has achieved good results in the areas where traditional Chinese games go out to sea (Southeast Asia + Hong Kong, Macao and Taiwan in China) and areas with higher difficulties in going out to sea (Japan, Europe and the United States). "Dragon Raja"
Driven by excellent achievements in going to sea, the company achieved overseas revenue of 788 million yuan in 2020, an increase of 129.1%. In the future, the company plans to further strengthen the self-issuing system based on the integrated mode of research and operation, closely integrate R & D and operation pipelines, and actively promote the global layout. At the same time, according to the company's annual report, the company has a reserve of "Project B" (tentatively named), plans to quote International IP (a science fiction film with a box office of $1.5 billion), and has reached a cooperation plan with Tencent for global distribution, which is expected to become a benchmark product for the company to open the global market and enhance the international influence of the "Archosaur Games" game brand.
From the product reserve point of view, consolidate the basic MMORPG plate, break through SLG, women to the new track.
MMO track, based on mature experience and continuous development and innovation, round-based MMO "Dream of the New World" (launched in 21-1-27) topped the iOS free list on its first day of launch; "Heart of Noah"
(expected to launch 4Q21) is positioned as an open world-style MMO, with the first introduction of the concept of "seamless spherical map". SLG track, "Hongtu under" the first test water performance is extraordinary, the first day on the iOS bestseller list Top8, first month running water more than 300 million (according to gamma data), 2021 will be launched in Japan, Southeast Asia, Europe and the United States and other regional markets, sea performance is expected; "Project C"
(provisional name, expected 4Q21 launch) Integration of simulation operation and large sand table exploration, using American cartoon style, more suitable for pan-users and female users; reserve "The Legend Of Three Kingdoms" (classic IP adaptation, expected to launch in 22 years). For women to the track, "Project A" (tentatively named, expected to be launched in 22 years) will be operated by a new generation of experienced female producers, which is expected to give full play to the company's art advantages, and the delicacy and richness of the products will be greatly improved.
Investment suggestion: as a representative manufacturer of technology R & D, the company continues to pursue extreme innovation, relying on its own R & D strength barriers and Tencent's top distribution resources, to invest core resources in MMO and SLG, two key tracks with high investment and high return. We are optimistic about the company's ability to continuously and steadily output high-quality game products as a top CP party. We expect the company's net profit from 2021 to 2023 to be 585 million yuan, 946 million yuan and 1.5 billion yuan respectively, corresponding to 0.72 yuan, 1.16 yuan and 1.85 yuan for EPS.
Risk tips: industry regulatory policy changes, new product research and development progress is not up to expectations, overseas market expansion is not up to expectations, brain drain risk, corporate governance risk.