Main points of investment
Glacier Network is the main online game enterprise integrating research and transportation in China. The main business is a large-scale multiplayer online game developed based on self-developed engine technology. It mainly adopts independent operation mode, mainly client-side online games, and covers mobile games, web games and other game types. At present, the main products in operation are client-side online games "Expedition OL", "Longwu 2" and "Invincible Legend".
The growth of online games at the PC end has stabilized, while the mobile end has maintained rapid growth. According to data released by the Game work Committee, the sales revenue of China's game market in 2016 was 165.57 billion yuan, an increase of 17.7 percent over the same period last year.
PC end game market: the scale, the market pattern tends to be stable, the growth rate slows down. The market size of client games and web games declined in 2016. Mobile game market: the year-on-year growth rate in 2016 was as high as 59.19%, with sales of 81.92 billion yuan, accounting for more than 49% of game market revenue.
The company's product research and development speed up, novice travel is worth looking forward to. At the beginning of its establishment, the company focused on the development and operation of client-side online games. at present, while tamping the boutique client game market, it also actively develops the mobile game market, and the product research and development is obviously accelerated. Currently in the development and testing stage, including "Shadow Warrior", "Ghost Valley unparalleled" and other games, brand-new mobile game products are also in the development stage.
According to KuaiBao's 2016 results, the company's revenue remained stable in 2016, up 2.9% from a year earlier, while net profit declined to a certain extent, down 9.4% from the same period last year, affected by R & D and promotion expenses.
However, in the fourth quarter, the single-quarter net profit increased significantly compared with the same period last year and month-on-quarter, with a net profit of 40 million per quarter, an increase of 53.8% over the third quarter and 21.2% over the same period last year. We believe that after the large-scale promotion of the "invincible legend" in the third quarter, the expenses in the fourth quarter gradually decreased, the profitability of the "invincible legend" gradually reflected, and the net profit increased significantly. With the acceleration of the company's product research and development, games such as "unbeatable Legend" and "Ghost Valley unparalleled" have gradually entered a profit period, and the company's performance is expected to improve significantly.
Profit forecast and valuation: we expect the revenue of the glacier online game business from 2016 to 2018 to be 381 million yuan, 514 million yuan and 926 million yuan, an increase of 3%, 35% and 80% over the same period last year. The net profits attributed to the parent company were 151 million yuan, 194 million yuan and 275 million yuan respectively, up-11.77%, 28.35% and 41.36% respectively over the same period last year. The corresponding EPS is 1.51,1.94,2.75 yuan respectively. As a secondary IPO, the company is more flexible, and we give it a certain valuation premium. The company's 2017 65XPE, corresponding to the target price of 126.75 yuan, covers for the first time and "increases its holdings" rating.
Risk tips: 1) the overall decline risk of the client game industry; 2) the brain drain risk; 3) the new game research and development progress is not up to the expected risk.
