Due to the influence of macro factors, the advertising of the company's upstream customers decreased, resulting in the company's quarterly report lower than expected. However, the company's IP still has strong vitality, and the global MAU remains at the 350 million level. We expect that with the launch of the company's new products, IP derivative business and home education business, the company's performance is expected to maintain steady growth. We downgrade the company's EPS forecast from 2019 to 2020 to 0.52 EPS 0.61 yuan (the original forecast is 0.78x0.96 yuan) and forecast its 2021 EPS to 0.69 yuan. Considering the strong vitality of the company's IP and the gradual landing of follow-up new business, we maintain the "buy" rating.
The company's performance in 2018 is in line with expectations, and Q1 performance in 2019 is lower than expected. ① achieved revenue of 2.725 billion yuan in 2018, + 95.17% year-on-year; net profit of 842 million yuan, + 113.76% of the same period last year, mainly driven by the completion of mergers and acquisitions of Outfit 7 in the reporting period; ② Q1 achieved revenue of 650 million yuan in 2019,-5.7% of the same period last year; and net profit of 254 million yuan, 13.73% of the same period last year, due to the reduction of upstream customer advertising in the first quarter ③ announced its 2018 dividend plan, handing out 0.66 yuan for every 10 shares and adding 8 shares.
The scale of users remains at a high level, and the launch of new products is expected to drive the continuous growth of users. As of March 31, 2019, the company's average MAU reached 350 million. According to the global mobile game index report released by App Annie in March 2019, the company's overseas subsidiary Outfit7 ranked third in the global publisher download list, and the parent-child interaction app "Tom Cat 2" ranked sixth in the global overall download list. The company's IP influence continues to grow around the world. Based on TalkingTom IP, the company plans to expand its new products and release "Tom Cat Flying car", "Tom Cat Water Polo Battle", "Tom Cat Rescue" and other games in 2019. We expect that more incremental users will be brought as the new products are launched.
IP derivative business accelerated, home education business made a breakthrough. The company Tom Cat parent-Child Park opened in Q4 in 2018 and has now hosted 30,000 families; the IP license has cooperated with Candy lab, Shuangchi shoes, Little Deer Ding Ding and other brands with good responses. We expect the IP derivatives business to accelerate monetization after the initial test. Combined with AR technology, the company developed "Tom Cat AR Learning English" App and course. At present, the App has been downloaded more than 250,000 times. With the increasing promotion of the company, the home education business is expected to become a new growth point of the company's performance.
Risk factors: game regulation continues to tighten; new product release fails; overseas market shrinks.
Investment advice: in view of the macroeconomic impact, the company's performance growth is lower than expected, we downgrade the company's annual EPS forecast for 2019-2020 to 0.52 EPS 0.61 yuan (the original forecast is 0.78 Universe 0.96 yuan) and forecast 2021 EPS of 0.69 yuan. Considering the strong influence of the company's IP, rich reserves of game products and the follow-up of IP derivatives and home education business is expected to accelerate, long-term performance still has a lot of room for growth, we maintain the "buy" rating.