Event: the company released its annual report in 2020 and quarterly report in 2021. (1) in 2020, the company achieved operating income of 1.416 billion yuan, an increase of 64.4% over the same period last year; a net profit of 301 million, an increase of 78.0% over the same period last year; and a net profit of 244 million, an increase of 56.7% over the same period last year. (2) 2021Q1 achieved operating income of 516 million yuan, an increase of 120.0% over the same period last year, and net profit of 151 million yuan, an increase of 970.3% over the same period last year, deducting 151 million yuan of non-return net profit, an increase of 1086.2% over the same period last year.
The traditional ladder advertising Q4 recovered obviously and gradually digested the negative impact of the epidemic. In 2020, the company's revenue from building advertising reached 197 million yuan, down 55.22% from the same period last year, with a gross profit margin of 58.71%. The building advertising business was obviously affected by the epidemic, and there was a large decline from January to September 2020. The company took the initiative to shrink the self-owned sites with higher procurement costs in some first-tier and new first-tier cities, and optimized the location layout and further increased the introduction of strategic customers. 2020Q4 building advertising business gradually improved.
The merger and acquisition of hippo games accelerate the development of Internet advertising business and accelerate the growth of performance. The company continues to make efforts in the Internet advertising business, and its subsidiary Li'an Media acquired Clockwork and its hippo game in October 2020 to speed up the efficiency of advertising and promote the rapid growth of the company's performance. In 2020, the revenue of the Internet advertising business was 1.1 billion yuan, an increase of 527.93 percent over the same period last year, accounting for 77.83 percent of the total revenue, an increase of 56 pct over the same period last year, a gross profit of 27.96 percent, and a net profit of 226 million yuan. At present, Li'an Media has reached business cooperation with Baidu, Inc., XIAOMI, movisita and other leading companies of Internet advertising business, covering a wide range of businesses all over the world. It is expected that the company will continue to maintain high growth in the future, driven by the dual growth of traditional Internet advertising and hippopotamus games.
Deeply cooperate with the short video platform to grasp the off-site traffic dividend to improve the efficiency of advertising. Relying on super leisure game products as the entrance of off-site traffic, hippo games cooperate deeply with Kuaishou Technology technology, byte jump and other head short video platforms, and constantly expand the business direction of Internet advertising and content cash. Relying on the strong Internet traffic operation gene and industrial traffic entrance production capacity, the company expands its own traffic supply in the fields of leisure games, tools, consulting and reading, so as to fully enjoy the dividend of advertisements outside the short video platform.
Investment suggestion: rely on the short-term video station to realize the dividend, hippo game industrial production capacity is outstanding, to create a flow operation platform, long-term development is expected. It is estimated that the net profit for 2021-2023 is 606 million yuan / 868 million yuan respectively; the year-on-year increase is 101.1%, 43.2% and 34.7%, corresponding to the 2021 / 2022 / 2023 13.8/9.6/7.1XPE, maintaining the "buy" rating.
Risk tips: high goodwill balance risk, advertising business competition aggravating risk, game policy risk.