Incident: On January 23, 2024, the company announced the “Instructions for Issuing Convertible Corporate Bonds to Unspecified Targets”, which will issue 580 million yuan of convertible corporate bonds. This issuance and fund-raising project is expected to expand the company's playing card production capacity and improve product quality, further increase the company's domestic market share, actively lay out playing cards overseas, increase profitability, and promote long-term growth.
Comment:
Convertible bonds help develop the poker business. After deducting issuance costs, the capital raised by this convertible bond will be invested in a project to build a production base with an annual output of 600 million playing cards to support business needs; relieve financial pressure, optimize the balance and liability structure, thereby improving profitability and promoting sustainable development; at the same time, it can greatly improve the company's production efficiency, production scale and production technology of poker products, effectively improve product quality, increase market share, consolidate the company's leading position in the domestic market, and further expand the company's international influence.
We believe that the company's playing cards have medium- to long-term price increases. As the company's Chuzhou production base is put into operation, production capacity is expected to expand, and the domestic market share and export share are expected to further increase.
The company's gaming business is performing steadily. The company's core games in the fishing category “Fishing Explode the Sky” and “Fishing with Your Fingertips” basically remain in the top 150 iOS bestsellers, and “Yao Ji Fishing 3D” is also impressive.
We believe that the company has a clear advantage in the fishing game category. The core game has remained stable and high for many years, showing strong user stickiness. It is expected that with version optimization, the core game is expected to continue to drive the company's performance growth. The company's 2021-2023H1 game business accounts for more than 30%. The game business performance is stable and has always been a stable driving force for the company's business growth.
The company continues to advance in the marketing business. The 2023 mid-year report shows that the company's marketing business continues to grow, accounting for more than 45%, and the marketing business is growing steadily. Shanghai Xiting Culture Media, a subsidiary of Yao Ji, has built the Shanghai International Short Video Center base. The base is located in Yao Ji Science Park, Jiading District, Shanghai. Its main business is to provide customers with infrastructure such as content manufacturing, video technology, and live streaming scenarios. Currently, the business situation is stable. At the same time, the company is making frequent efforts in the star card market, innovating the business layout, and deeply cultivating cards to create new growth points.
In 2023, the company expects to achieve net profit of 53%-650 million yuan (year-on-year increase of 52%-86%), net profit of non-return to mother of 5-6 billion yuan (year-on-year increase of 46%-75%), 2023Q4 to achieve net profit attributable to mother -0.28 million yuan to 92 million yuan, and net profit from non-return to mother of -0.23 million yuan to 77 million yuan.
Investment advice:
The company's playing card business is operating steadily. As production capacity expands and production capacity is expected to expand, market share is expected to increase further. The company's core game performance in the fishing category is stable, and the marketing business performance is excellent.
The three major businesses work together to continue to drive the company's performance growth. It is recommended that attention be paid.
Risk factors: tightening game regulations; declining sales in the poker business; game performance falling short of expectations; risk of macroeconomic fluctuations, etc.