Event: IGG recently released semi-annual results, 1H21 revenue + 33% year-on-year to HK $3.24 billion, in line with our expectations, mainly driven by the steady monthly performance of the flagship "Kingdom era". The profit of the main business (excluding investment income) was-20% to HK $490 million compared with the same period last year, which was about 3% higher than we expected, while the corresponding profit margin fell to about 15%, mainly due to the expansion of the R & D team and increased spending on game promotion. The company announced a dividend of HK14.5 cents per share, with the dividend payout rate stable at 30%.
Blockbuster products are doing well, and new visitors are poised to start: revenue from the flagship game Kingdom era 1H21 is + 34 per cent year-on-year to HK $2.74 billion, accounting for 85 per cent of total revenue, with an average monthly flow of HK $480 million in the first half of the year. As of June, the "Kingdom era" registered 440 million users and MAU reached 20 million (VS at the end of 13.7 million), mainly due to the promotion of buying volume, IP linkage and the launch of new games. The female cross-dressing game "time Princess", which was launched in 2020, has reached 1 million MAU as of June, with 1H21 accounting for 5% of the total income, with an average monthly flow of HK $28 million in the first half of the year. According to the company's performance materials, time Princess entered the Japanese and South Korean markets in May and July this year respectively, and recently launched in Chinese mainland market on August 20. In addition, the company's new placement game, Wrath of Destiny, was launched in June this year. The English Android version of daily running water has reached nearly HK $200000 and will be launched on the Apple Inc platform in the next few months. This performance will announce the placement of the new game "Project Mythical Heroes" and the new game of strategy "Project LW".
And "Project MR2.0", the company expects these new games to be launched in the second half of the year.
Maintain active investment and move towards the path of quality and diversification: we believe that the company is increasing investment for long-term growth. 1H21's sales / administration / R & D expenses account for 29% of 7ppts/2ppts/3ppts, respectively, compared with the same period last year. In terms of marketing and promotion, the company increases its investment in global marketing promotion of core games such as "Kingdom era" and "Princess of time"; in terms of research and development, the company plans to expand its staff this year to consolidate its R & D strength. By the end of June, the company has 2619 employees (2022 at the end of VS 2020), and the company currently has more than 30 products under research, striving to make a breakthrough in non-SLG categories on the basis of tamping the advantages of SLG categories.
Investment advice: maintain a buy-B rating. The target price is HK $11.7, based on 10 times dynamic P / E and HK $1.17 in diluted EPS after adjustment for 2022. The company takes the lead in the global game research and transportation ability, maintains active investment, and makes efforts to polish high-quality new products. We expect the company's revenue to grow by 18% in 2021 / 2022, with an adjusted net interest rate of 20.9% and 21.0%.
Risk tips: 1) tighter regulation of the Internet industry; 2) the realization of new games is less than expected; 3) the investment in marketing and research and development pull down profit margins; 4) the monthly flow of flagship games falls sharply.