Performance Overview: In 2023, the company achieved operating income of 16.547 billion yuan, a year-on-year increase of 0.86%; realized net profit of 2,659 billion yuan, a year-on-year decrease of 10.01%; realized net profit without deduction of 2,497 billion yuan, a year-on-year decrease of 13.38%. The company's 2023 profit distribution plan plans to distribute 3.7 yuan (tax included) to all shareholders for every 10 shares. The estimated cash payment amount is about 821 million yuan. According to the company's 2024Q1 performance forecast, 2024Q1 expects to achieve net profit of 60 to 650 million yuan, a year-on-year decrease of 16.08%-22.54%; it is expected to achieve net profit without deduction of 59-640 million yuan, a year-on-year decrease of 4.54%-11.99%.
Breakthrough in multiple game categories, self-developed agent dual line layout. In 2023, the company's products such as “Doulo Continent: Battle of the Spirits”, “Puzzles & Survival”, “Call Me the Treasurer”, and “Legend of the Mortal Immortals: The Human Realm” performed well. The MMORPG mobile game “Legend of Mortal Immortals: The Legend of the Human Realm”, which was distributed as an agent by the company in 2023, successfully broke through on the MMO circuit; the self-developed Three Kingdom-themed strategy mobile game “Domination” combined innovative marketing methods with high-quality ambassadors, and continued to break through in terms of material creativity. After launch, it performed steadily, stabilizing the company's SLG category product structure. In terms of product reserves, on the one hand, the company is deeply involved in core categories and reserves a variety of boutique self-developed mobile games. On the other hand, it is deeply tied to many high-quality developers such as eEntertainment Network and Yanqu Network through investment and business support, combining agents and customization to enrich the company's high-quality product supply and deepen diversified product layout. The company currently has more than 40 self-developed or proxy high-quality mobile games, covering MMORPGs, SLG, cards, simulation management, and many other genres such as RPGs, casual puzzles, etc., which will be launched to the global market one after another.
Effectively explore the global market, and many benchmark products have performed steadily. In 2023, the company achieved overseas revenue of 5.807 billion yuan, forming a product matrix based on MMORPG, SLG, cards, and simulated management in the global market. Benchmark products such as “Puzzles & Survival”, “Call Me the Treasurer”, “Song of the Cloud”, and “Douro Continent: Battle of the Spirits” performed steadily. By continuously exploring the deep integration of creative elements and games, the company's phenomenal overseas product “Puzzles & Survival”, which combines the “3 matters+SLG” gameplay, continues to expand effective users and lengthen the product life cycle.
“Puzzles & Survival” has achieved a breakthrough in the innovative integration of game categories and the integration of game themes and regional culture. In April 2023, it once again set a new peak monthly sales record. From launch in 2020 to February 2024, the game's cumulative turnover exceeded 10 billion yuan.
Adopt a “three-step AI” strategy, and gradually integrate AI applications into various business processes. The company adopted an “AI three-step” strategy. Start by gradually integrating AI applications into various business processes. Second, based on early accumulation, tooling and modularity are realized, and a more automated and intelligent game industrialization pipeline is built. The third step is to explore more possibilities for AI to enrich gameplay. The company will instrumentalize and modularize capabilities suited to various business processes, apply decision-making AI and generative AI to various business processes, and gradually create a digital intelligence product matrix that runs through the entire R&D and operation process. At present, the company's generative AI technology has been maturely applied to modules such as 2D drawing, intelligent customer service, localized translation, copywriting production, and collaborative office, greatly improving human efficiency.
Profit forecast: The company's self-developed agents have a dual line layout to consolidate product reserves. Benchmark overseas products perform steadily, and AI applications are integrated into many aspects of the business. Currently, many games in operation are in the early stages of promotion. The company continues to increase traffic, which has a phased impact on performance. We have lowered the company's profit forecast. The company is expected to achieve net profit of 30.24/34.26/3,940 billion yuan in 2024-2026, an increase of 13.73%/13.32%/14.98% year-on-year. Corresponds to PE12/11/9x and maintains a “buy” rating.
Risk warning: industry competition increases risk; risk of policy regulation; risk of game performance falling short of expectations.