Perfect World (002624): Gaming business maintains high boom, online entertainment hopes to boost first-quarter performance growth

The company’s recent situation, Perfect World, released a performance report for 2019, which is expected to achieve revenue of 80 in 2019.

380,000 yuan, an increase of 0.

05%, mainly affected by the replacement of the cinema line business, after excluding the impact of the consolidation scope adjustment, revenue increased by 6%.

78%.

Realize net profit attributable to mother 15.

04 billion, down 11.

85%; deduct non-net profit 11.

04 billion, down 23.

70%, mainly due to the poor performance of the film and television business affected by the market downturn.

The express situation is in line with our expectations.

The gaming business maintained a high level of prosperity, and a number of key products are expected to go online in 2020.

In 2019, 5 new internal games including “Perfect World” mobile game, “Grand Condor 2” and “Xiao Xiao Ao Jiang Hu” were launched, and the company’s game business achieved revenue 68.

3 billion (+ 25% YoY).

99%); net profit 18.

8 billion (+ 37% YoY).

41%).

Looking forward to 2020, the new “Smiling Swordsman” launched in December 2019 will perform well. We expect to generate about 3 trillion in the next month and increase 1Q20 performance; other games will continue to contribute.

In addition, the company said that mobile games such as “Fantasy New Legend”, “Remains of God of War” and “Continent of the New Demon Demon” and “Very Hero 2” PC + console, “Magic Legends” PC + console, “Torchilight Frontiers” PC + console and other productsIt is expected to be online by 2020.
With the joint efforts of new and old games, we expect the game business to continue to grow in 2020.

The performance of the film and television business was not good, and provision was made for impairment to release risks.

Film and television revenue in 2019 also fell 42.

54% to 12.

10 trillion, about expected 3.

10,000 yuan.

Considering the downturn in the industry, the company made provision for inventory price reductions for film and television products3.

6 trillion, provision for impairment of goodwill 3.

500 million.

The company stated that it would confirm the relevant performance compensation, so it is expected that the impairment of goodwill has no significant impact.

In 2020, the company stated that it will focus on digesting inventory episodes. We expect the film and television business to turn around.

Online entertainment was hot during the epidemic, and 1Q20 performance showed flexibility.

In terms of games, “New Swordsman” ranks 10th in App Annie’s January revenue rankings, and other products also perform well. We expect the 1Q20 game business to achieve a profit growth of more than 50西安耍耍网%.

In terms of film and television, “Stewed Rock Sugar” has been scheduled for airing in March; under the influence of the epidemic, the platform ‘s demand for film and television dramas has greatly increased, but the production of film and television projects has been affected to a certain extent.1Q20 is also expected to have multiple episodes to confirm revenue.

It is estimated that according to the performance report, we slightly increase the net profit in 2019 by 0.

8% to 15.

4.0 billion; Considering the popularity of online entertainment, we raise our net profit for 20204.

5% to 23.

50 ppm; Maintain profit forecast for 2021 unchanged.

We maintain our Outperform rating and currently continue to correspond to 2020/2126.3/22.

4x P / E.

Consider moving up the estimated hub and raising the target price by 16.

2% to 54.

5 yuan, corresponding to a price-earnings ratio of 30 times in 2020, which is 13 compared with current expectations.

9% upside.

Existing games and new games outperformed expectations at risk, and TV drama industry regulation is becoming severe.