The Spring Festival has always been the peak season, and the product activity under the background of special holidays is expected to exceed that of the same period last year. Since the beginning of January, the downloads of Outfit7 on the IOS platform have grown rapidly and are still at a high level. The number of downloads of "my Tom Cat 2" on the IOS platform increased from 14406 on November 5, 2019 to 60386 on January 28, 2020, while the number of downloads of "Tom Cat Hero Paradise" increased from 12059 to 55756 on January 27, 2020. While this figure only represents the IOS platform, since the company is not buying on the IOS platform, we expect the growth trend on the Android platform to be equally significant. Spring Festival has always been the peak season for companies, which is related to the characteristics of casual games, which will be downloaded and opened more frequently during holidays. Due to the special circumstances of the epidemic, the holiday of the Spring Festival in 2020 will be extended, which will directly enhance the product activity and prolong the active time.
Emerging markets lead the way in downloads and are expected to drive the company's continued global DAU growth. In 2019, India / Brazil / Russia / Indonesia and other regions such as India / Brazil / Russia / Indonesia ranked Outfit7 at 1, 3, 4 and 4 respectively in the overall downloads of iOS and Google Play games, while these regions are all fast-growing emerging markets in the global mobile application market. Global mobile advertising spending is expected to continue to grow by 26% year-on-year in 2020, benefiting from global emerging market growth dividends due to the company's leading IP and global operational strength.
After the merger and acquisition of Outfit7, the product matrix is further enriched and iterated rapidly. The company has successively developed and operated more than 20 leisure mobile applications, and on the basis of the continuous optimization and upgrading of the existing head products, it continues to extend to the medium and heavy game field, improving the overall DAU and cash realization ability of the products, and the annual DAU growth rate of the company's products is in double digits.
Access to the headline pangolin advertising system, advertising cash efficiency is expected to improve rapidly. The cooperation between the company and the Toutiao pangolin advertising system mainly focuses on four aspects: 1) the company is Toutiao Certified MCN;2) the company accesses the Toutiao pangolin advertising platform; 3) the company advertises for its brand advertisers on the Toutiao platform; and 4) potential global cooperation in the future. Based on the headline algorithm and resource advantages, it will help to improve the efficiency of corporate advertising, and the unit price of corporate advertising will continue to increase after access.
The strategy will be refocused and be installed at the young age of 2020. In order to optimize the company's resource allocation and asset structure, focus on the core business, and improve the company's medium-and long-term profitability, the company sold its shares in the former fine chemical business-related subsidiaries in 2019. Zhe Xin mobile Internet application issuance business is also in a state of strategic contraction, and the company plans to impairment goodwill on related assets, including Hangzhou Zhe Xin. The company will fully focus on the operation of Tom Cat IP in 2020, and make every effort to promote online and offline multi-dimensional realization.
Upgrade the rating to "buy". The company expects a large amount of goodwill impairment and asset impairment in 2019, but after the completion of the above strategic adjustment, we expect 2020 to usher in a basically upward inflection point. It is estimated that the net return profit in 2019, 2020, and 2021 will be-2.42, 1.09 and 1.34 billion respectively, and the PE in 2020 will be 10 times that of 12 in 2021. The valuation is relatively superior to the company.
Risk tips: the launch of new products is not as expected; the growth rate of mobile advertising is not as expected; the market systemic risk; the proportion of equity pledge is high, if the market fluctuates sharply, there will be passive selling risk.
