Perfect World (002624): The rich performance of movie game project reserves confirms the low valuation
Key Investment Events: On the evening of April 29, the company disclosed its 2018 annual report and 2019 first quarter report.
2018 profit distribution plan: The company intends to replace the total share capital of the company’s repurchased shares with the total number of shares on the registration date of the future implementation of the distribution plan as the base, and distribute a cash dividend to all shareholders for every 10 shares.
80 yuan (including tax), the dividend ratio is 38.
“Perfect World” mobile game was launched, and the increase in gross profit margin drove 2019Q1 performance growth beyond the forecast limit: in 2018, it achieved operating income of 80.
3.4 billion (+1.
31%), net profit attributable to mother 17.
0.6 billion (+13.
38%), net profit 无锡桑拿网 attributable to mother after deduction 14.
470,000 yuan (+3.
54%), affected by the game industry’s phased version policy in 2018, revenue from the game business has decreased, and the company’s revenue in 2018 increased by low single digits.
In Q1 2019, the company achieved operating income of 20.
4.2 billion (+13.
26%), after excluding the impact of the theater business, the revenue of the game and film and television business actually increased by 32.
8%, net profit attributable to mother 4.
8.6 billion (+34.
95%), net profit attributable to mother after deduction.
6.3 billion (+56.
77%), “Perfect World” mobile game launched, gross profit margin increased to the company’s first quarter performance growth exceeded the forecast limit.
Mobile games: The core products performed well and the follow-up reserves were abundant: new game products such as “Reincarnation”, “Scorching Fire” mobile games and “Wulin Waichuan Mobile Games” launched by the company performed well; “Xianxian Mobile Games”, etc.Classic games continue to perform steadily.
The company’s masterpiece “Perfect World” mobile game went live on March 6, 2019, and ranked first on the iOS bestseller list more than half of the first month of the release. We predict that the first month’s water flow is expected to exceed 1.5 billion; the future is expected to launch “The Condor Heroes 2″”New Demon Continent”, “Four Seasons Songs in Cloud Dreams”, “Cygnus of Dreams”, “New Swordsman”, “My Origin” and several other models cover MMORPG, turn-based, two-dimensional, sandbox, SLG, ARPG, Open World and many other types and alternative new games.
At the same time, the company accelerated the promotion of mobile games to the sea. In March 2019, it has reached a strategic cooperation with Google.
Revenue from mobile games in 201827.
1.1 billion (-11.
94%), with a gross profit margin of 63.
18%, up 4 each year.
End-game and console game veteran reserves are high-quality: classic end-game products “Xianxian” and “Perfect World International Edition” continue to contribute stable income; report that the two companies launched the end-game and console dual-platform game “Subnautica (Deep Sea Trek)” is widely used by playersWelcome; Westward Journey developed by the French team can launch a 2D horizontal action adventure game “Unruly Heroes”. It will be available on Steam, Xbox, Switch and other PC and console platforms in January 2019.
Reserve products: “Don’t Even Think” in the testing of the host platform; R & D of new products of the flagship IP “Xianxian” and “Perfect World”; R & D of 2 well-known IP host games by European and American teams.
The company’s revenue from terminal games in 201821.
9.6 billion (+10.
28%), gross profit margin 73.
67%, down 2 averages previously; console games 4.
6.3 billion (-10.
99%), gross profit margin 58.
83%, up 2 every year.
With both core R & D and operational capabilities, the development of the era of cloud gaming will also bring more popular products: cloud gaming operates through cloud servers, breaks device restrictions, reduces user entry costs, and enables users to have a better gaming experience.The reduction in equipment door biology means that players can experience extended games more conveniently in the region, so big manufacturers with core research and development capabilities benefit.
The company fully cooperates with the steam platform. It is expected to perform front-end debugging on the platform and strengthen the attributes of cloud games. The company is exploring the path to cloud games in the 5G era and preparing for the arrival of the era of cloud games.
The film and television project reserves are abundant, which is expected to achieve high growth: the company’s film and television business in 2018 achieved revenue26.
1.3 billion (+14.
62%), Beijing Perfect World Film & Television Media Co., Ltd. net profit.
28 ppm, the net profit of the film and television sector is about 12.
In terms of TV dramas, the company’s broadcasts in 2018 include: “Blade Attack”, “Scorching Fire”, “Suddenly This Summer”, “Returning”, “Flight”, “The Most Beautiful Youth”, “Sweet Honey Embers Frost”, “Motherhood””Legend of Su Mo’er”, “The Loess High Sky”; The dramas that have been broadcast in 2019: “Little Girl Flowers Never Give Up”, “Youth Fight”, “While We Are Young”, and rich project reserves.
Revenue of the company’s TV drama business in 201817.
4.9 billion yuan (+55.
01%), gross profit margin 34.
40%, an annual decrease of 18.
In terms of movies, the Internet movies “Soul Ferry · Huangquan”, “The Pirates of the River” and the cinema movie “Shadow” won good reputation, and “Shadow” won 6.
2.8 billion box office.
Investment suggestion: We repeat the logic since the end of last year, and suggest that we actively pay attention to the game leader that Q1 can ensure stable growth. Currently, Perfect World is a game + film and television white horse, and its valuation is significantly underestimated. We predict that the company’s EPS for 2019-2021 will be1.
31 yuan, corresponding to the current expected PE is 17 respectively.
2x, maintain BUY-A investment rating.
Risk reminder: the risk of the game business failing to meet expectations; the risk of game policy fluctuations; the risk of increasing game operating costs; the risk of TV drama revenue recognition not reaching the expected time