Event: the company's revenue recorded in 2020 was 3.21 billion yuan, up 15.0% from the same period last year; from the division point of view, the revenue from the game division of the company was 2.81 billion yuan, up 14.7% from the same period last year; revenue from information services was 350 million yuan, up 10.1% from the same period last year; revenue from SaaS and other related services was 38.15 million yuan, up 130.1% from the same period last year; and offline entertainment revenue was 6.49 million yuan, an increase of 27.9% over the same period last year. During this period, the company increased its investment in research and development, impaired the goodwill of Shanghai Huoxing and the loss of intangible assets caused by the optimization of non-core strategic products. The company recorded a net loss of 440 million yuan in 2020, from profit to loss compared with the same period last year. The adjusted annual profit was 150 million yuan, down 73.1% from the same period last year.
Summary of the report
Sanxiao Game Operation Excellence supports Game Business growth Company established elimination and competitive games as its own research direction in 2020, at the same time, medium and heavy game release and introduction of overseas boutique console / PC games or investment, customized product development strategy. In 2020, the company's game revenue increased by 14.7% compared with the same period last year, mainly due to the excellent performance of the second-generation elimination games represented by the company's traditional games "Dream Garden" and "Dream Home", which exceeded the industry level.
The test data of the company's self-developed competitive game "Little Animal Star" in 2021 is expected and is expected to be launched in Q2 in 2021. In addition, the company is expected to launch "Glory all-Star", "Fantasy Restaurant (overseas version)", "Code name [Eternal]" and so on in 2021.
The spin-off SaaS business segment will incubate the accumulated internal Taiwan technical support capabilities into interactive product lifecycle SaaS tools, from early development to product launch and later operation, to provide system-wide support services for content developers in terms of policy compliance, AI big data calculation and analysis, traffic acquisition and cash realization. In 2020, the company split the sector and recorded 38.15 million yuan in revenue, accounting for 1.2% of the total revenue, which is currently relatively small. The company is building a partnership matrix for excellent content developers, which is expected to be presented in the second half of 2021.
The offline store has entered a period of expansion. The company's offline store "play together" is created by the company in conjunction with Tencent, Nintendo and Sony.
The company expects to open 30 new "play together" offline stores in 2021, obtain QQfamily license in March 2021, and plan to open a total of 150 QQfamily theme offline stores in the next 3 years. A "play together" single store with an area of 350sqm is expected to have 680 operators, with a monthly income of about 40-500000 yuan, and an estimated operating net profit of 20%-30%. The main business includes mainframe game experience and trendy game sales.
The target price is HK $3.97, downgraded to "overweight" the company's net profit in 2020 changed from profit to loss, much lower than market expectations, mainly due to the persistence of impairment provision; in 2021, the company's new tour "Little Animal Star" performance is expected, SaaS business unit split to open up new business channels, at the same time, the success and rapid expansion of offline store model is expected to lead to the rapid growth of the company's offline business. We give the company a target price of HK $3.97 based on the company's forecast price-to-earnings ratio of 18 times 2021, downgrading it to "overweight" compared with the expected increase of 5.0% in the recent closing price.
Risk tips: the launch of new games is not going well; SaaS business expansion is not as expected; offline store expansion leads to higher-than-expected cost growth, and so on.