Both income and net profit fell, basically in line with our expectations
Revenue in 21 fell 25.9% to 1.62 billion yuan from the same period last year, in line with our previous expectation of 1.63 billion yuan. The decline was mainly due to the delay in the launch of new games and the normal decline of old games with the life cycle; gross profit margin increased by 0.1% year-on-year to 67.4%; sales and marketing expenses decreased by 25.6% to 460 million yuan, mainly because there was no need for heavy marketing without the launch of large new games R & D expenditure increased by 37.9% to 360 million yuan over the same period last year, mainly due to the company's increased investment in independent R & D to expand the game product matrix; the adjusted net profit decreased by 38.6% to 310 million yuan compared with the same period last year, slightly exceeding our expectations.
The new tour "Ling Yun Nuo" has achieved good results, and the new 2D national style game "Ling Yun Nuo", which launched on January 20 this year, has won the 34th best-selling list of iOS games in mainland China, with a score of 6.4 points and more than 500000 attention on the TapTap platform, ranking the runner-up for women on the list. The game's revenue comes from the company's own channel, the ratio of gamers to external Apple Inc channel is as high as 1:1, a record, mainly due to: (1) excellent package optimization, can be adapted to more Android full-model; (2) the effect of purchase is significant, such as Douyin can be directly drained to the official website channel and national style new officials'PV promotional video response is enthusiastic. We believe that the bright performance of its own channel can bring a certain degree of flexibility to the overall flow and profit margin of "Ling Yunnuo". In addition, the overseas version of Lingyunuo is under preparation and is expected to be launched in different regions as soon as the end of this year.
Key reserve games are worth looking forward to.
The company has "du Lala promotion" and "code: FS2" two key reserve games. 3D modern women to the "du Lala Promotion" to develop AR face pinch, photo, social and other new games, in the technology part of the research with Apple Inc and other manufacturers, the goal is to refresh the company's historical product quality limit. At present, the game has received a version number and has been tested internally and externally, with good feedback from users, with a TapTap score of 8.3. external buying tests are expected in the second quarter of this year and will be launched within this year. As the second-generation product of the company's flagship game "floating Life for Qing GE", "Code: FS2" by ancient women has completed the development of the main framework and submitted the version number application, using a new engine effect and self-developed plot editor, and is expected to conduct an invitation test of the core players this year.
The target price is raised to HK $1.50 and raised to the "overweight" rating. It is expected that the company's 22-year revenue will benefit from Ling Yunuo and du Lala's promotion, which will increase by 35.4% to 2.21 billion yuan over the same period last year, and the adjusted net profit will increase from 310 million yuan in 21 years to 370 million yuan in 22 years. We value it at 72e PE, which is within the range of the average and its next standard deviation (5.7x-9.7x), to comprehensively reflect that the plate valuation is under pressure because the game version number has not yet been restarted and the company's new travel performance is expected to lead to a rebound in valuation. corresponding to the target price of HK $1.50, the potential increase is 15.4%, from "neutral" to "overweight" rating. This year, we will focus on the performance of du Lala's promotion, which is expected to be a further catalyst for valuation.
Risk hints: (1) the regulatory risk of the industry; (2) the performance of the new game is not as expected; (3) the market competition is intensified.