Caesars Culture (002425): Q1’s performance exceeds expectations.

Caesars Culture (002425): Q1’s performance exceeds expectations.

Event: On the afternoon of March 17, the company released the 2019 first quarter performance forecast: the first quarter of 2019 is expected to achieve net profit attributable to mothers1.

05?
1.

2.8 billion yuan, an annual increase of 80%?
120%.

Opinions: 1. The performance growth exceeded expectations, mainly contributed by the old game running water + “Dragon Ball” running water + overseas royalties.

The company’s net profit growth in 2019Q1 exceeded expectations, and the main game business was very endogenous: 1) The company’s old game “Three Kingdoms 2017” In January and February of 2019, the flow reached over 100 million, and other old games performed well; 2) The new game “Dragon Ball Awakening” launched by Yujia in the sky has performed well, and it is expected to exceed 100 million in the first month; 3) The company and GAMESAMBA will jointly own “Naruto” and “Fairy Tail” mobile games in Asia (except Japan and China) Mainland China) The distribution right is handed over to Suzhou Youyou, and the copyright attributable to the company accounts for 5 of the company’s total operating income in fiscal 2017.

75%, about 40 million yuan.

In addition, in terms of profit structure, the earlier period has been significantly optimized in the same period last year. This year, almost all of the main contributions were made this year, while most of them were investment income last year.

In the first quarter of 2018, the company realized net profit attributable to its parent of approximately 58.29 million yuan, of which 37.61 million were investment income obtained from the withdrawal of industrial fund projects.

2. The game product line is rich in 2019, many of which are high-quality IPs, which provide certain support for performance.

In 2019, the company’s game reserves are very rich. The headquarters and a number of subsidiaries Tianyou Youjia and Cool Cow interactively participated in the works online.

1) At the company’s headquarters, the key games expected to be launched this year include “Fairy Tail”, “Yuyu Hakusho”, “Naruto”, and “Soul Mountain Once Upon a Time”. It is expected to take online in the second half of the year.

Among them, “Fairy Tail” is a well-known young manga created by Japanese cartoonist Mashima Hiro, and its global sales have exceeded 60 million; “Yuyu Hakusho” is a Japanese comic book by Fu Jianyibo.”Slam Dunk” is also one of the three major cartoons of Japan’s “Weekly Youth Jump” in the 1990s; “Naruto” comics have expanded to more than 2 billion in the world; “A Sword Mountain Once Upon a Time” has been on TencentThe first echelon of the anime monthly ticket list, the comic version has reached 60 billion in popularity, and the number of clicks on animation works has exceeded 3 billion.

Other reserve IPs at the headquarters include “Silver Gravekeeper” and “New Gourd Brothers”.

Among them, the “Silver Grave Keeper” has more than 140 billion hits on the Tencent animation platform, with a user rating of 9.

5 points, the adapted mobile game has completed the first stage of testing.

2) Tianjia Youjia’s 3D MMORPG masterpiece “Three Kingdoms Powerless” (“Three Kingdoms 2018”) has successfully obtained the version number in the latest ninth batch of version numbers, and is expected to be released overseas in the second quarter and domestically in the third quarter.

Other reserve IPs include “Dragon Ball”, “Watching Homes”, “Kyushu Ailu”, etc. Among them, the “Dragon Ball” mobile game has been launched on the entire platform on February 28, and the “Kyushu Ailu” mobile game is expected to be launched in the second quarter of this year.
3) Cool Niu Interactive is expected to launch a number of games such as “Silver Gravekeeper: Rally”, “Royal Heroes” and “Awesome Tangmen” in 2019.

3. The domestic market for mobile game distribution maintains its advantages. The purchase volume + product model is gradually verified. The category expansion supports medium and long-term growth. The company applies the ability of fine purchases accumulated over the years during page games + intensive research and development and polishing products to the mobile game field.Has been verified on ARPG mobile games, H5 games.

At present, the company maintains its advantage in the mobile game distribution market. IResearch’s “Q1 2018 China Interactive Entertainment Quarterly Data Release Research Report” shows that the company ranked third in the mobile game market for Chinese listed game companies in Q1 2018, behind Tencent and NetEase.; At present, the company’s issuing strategy has been adjusted from the relatively specific “ARPG + SLG” to “multiple development”.

Since 2018, the company has made multi-dimensional attempts in game types and games, and successfully released the miracle H5 game “Angel Sword H5”, a turn-based mobile game “Awakening of the Fairy”, and an adventure-type MMO mobile game “Ghost 北京养生会所 Whisper”Lost City “, a casual legendary game” Slaying the Dawn of the Dragon “, has a variety of products with a monthly turnover of more than 100 million.

The expansion of categories and conducive to large-scale, but also help to mitigate the risk of dependent projects.

4. The senior executive Wu American American Min has outstanding ability to integrate resources, and the company cooperates closely with Tencent; the three subsidiaries each perform their duties to form a synergy.

1) One of the company’s core highlights is that Mr. Wu Yimin, the general manager, has rich industry experience and management experience in the field of Internet games, and can bring scarce high-quality resources to the company. He has served as product manager of the QQ Tang project team and director of cooperative product department.The principal of Tencent’s Korean game business, the general manager of Shanghai Shanda Game System, 都市体验网 the general manager of the studio, the vice president of Kingsoft, the president of Kingsoft, and the CEO of Yiqu Network.

Driven by President Wu, the company has maintained a close cooperative relationship with Tencent.

In 2016, Caesars culture obtained 10 heavyweight IP licenses from Tencent Animation, China’s largest internet animation platform, including “Soul Mountain in the Past” and “Silver Keeper”. Many of these IP-created games are also made byTencent is responsible for distribution.

2) Comprehensive transformation to build the entertainment matrix of three subsidiaries + three-phase industrial funds, and the short-term goodwill risk is small.

From 2014 to 2016, the company successively acquired 100% equity of Cool Cow Interactive, Huanwen Technology, and Tianyoujia, and transformed from the traditional clothing business to the Internet culture field. At present, it has formed an integrated and standardized management of the group, and the headquarters and its subsidiaries have collaborated efficiently.Organizational structure.

Caesar’s headquarters is responsible for the overall planning, operation, and distribution of the game; Kuniu Interactive is now a joint operation entity; Huawen Technology focuses on the copyright operation business, making full use of its own IP advantages, and rapidly realizing IP amplification and monetization by authorizing or investing in film and television animation projects.

Tianyou Youjia currently has the company’s main game research and development team. The team has grown from the initial acquisition in 2015 to more than 600 people. It has successfully developed the “New Fairy Sword Legend 3D”, “Saint Seiya: Rebirth”, “Three Kingdoms 2017″””, “Dragon Ball Awakening” and many other excellent mobile games.

Considering that this year is the year of the company’s product explosion, it is expected that no goodwill impairment will occur by the end of 2019.

In addition, the company participated in the third phase of the industrial fund, of which the third phase invested too many game developers, and was able to form a benign synergy with the company’s business.

5. Earnings forecast and evaluation: Cover for the first time, and give “Strongly Recommended-A” rating.

We estimate that the company’s net profit attributable to its parent from 2019 to 2020 will be 5.

63/7.

91 ppm, corresponding to current estimates of 13.
2 times / 9.

4 times.
Risk Warning: The release time of the version number lags behind expectations; the game launch time or flow does not meet expectations; the overseas market release effect does not meet expectations; the risk of goodwill impairment; and assessment of policy risks such as policy changes.