Sanqi Mutual Entertainment (002555) 18th Annual Report and 19Q1 Review: The company ‘s mobile game market share increased against the market (18% +) and high-quality new products in 19Q1 promoted high revenue growth (YOY95%)

Events: 1. The company announced its 18 annual report and realized revenue of 76.

3.3 billion (YOY23.

33%), net profit attributable to mother 10.

09 million yuan (YOY-37.

77%), deducting non-net profit 4 due to mother.

7.5 billion (YOY-54.

7%), net operating cash flow19.

5.4 billion yuan (compared with the same period of last year).

69%); non-GAAP adjusted net profit attributable to mother 15.

10,000 yuan (6 compared with the same period last year.


2. The company announced the January 19 report and realized revenue of 32.

470,000 yuan (95% year-on-year

46%, QOQ54.

77%), net profit attributable to mother 4.

5.4 billion (YOY10.

8%), the deducted non-net profit4.

170,000 yuan (6 compared with the same period last year).

41%), net operating cash flow1.

5.8 billion (YOY-71.


3. The company expects the net profit attributable to its mother to be RMB 0.9 billion to RMB 1 billion (YOY12.

31% -24.

78%), corresponding to net profit attributable to mothers in 19Q24.


4.6 billion (YOY14% -39%, QOQ-2% to + 20%).

Opinions: 1. The company’s 18-year revenue has steadily increased (YOY23%), and the profit-side has replaced the goodwill. It has increased slightly (YOY7%). The domestic mobile game market has increased against the market (6% + 18), and the industry has further increasedConsolidation.

19Q1 revenue increased significantly (YOY 95%, QOQ 55%), mainly due to the launch of new games such as “Sword Passed”, “Duro Land”, and performed better than expected.

① 18Q1 / 18Q2 / 18Q3 / 18Q4 / 19Q1 achieved revenue of 16.





470,000 yuan, deducted non-net profit3.



07 / -6.

1.7 billion, net operating cash flow.




5.8 billion.

In 19Q1, driven by new products such as “One Broad Sword” and “Douluo Continent”, revenue growth increased. In 19Q1, net operating cash flow declined, and revenue growth brought inflows.

65 ppm, budget increase due to increased Internet traffic costs18.

69 ppm; 19Q1 gross profit margin is 88%, net profit margin is 15%, and sales expense rate is 66%.

② The proportion of mobile game revenue increased from 31% to 73% in 16-18, and the proportion of page game revenue increased from 56% to 22%; The proportion of mobile game revenue increased from 21% to 100% in 17-18, and remained 重庆耍耍网 at 70%.High-speed growth; The gross profit margin of mobile games increased from 62% to 81% in 16-18 (increasing the proportion of self-developed research and decreasing the proportion of game segmentation), and the gross profit margin of page games remained at 67-72%.

③18-year sales expenses 33.

RMB 470,000

41%), with a sales rate of 43.

85%, of which Internet traffic costs 31.

8.9 billion (80% YOY, accounting for 44% of game revenue, compared with 31% in 17 years), which corresponds to the company’s growth in game users (increased by more than 1).

1 billion), 18 years of “Ghost Wonder City”, “Angel’s Sword H5”, “Awakening of the Fairy”, “Breaking Dragon” and other games are in the main promotion period, broadening the company’s customer base, the promotion effect is better.

④ Goodwill was impaired for 18 years due to the unfinished performance of Mo Yan.

6 trillion is included in recurring gains and losses, and performance compensation income4.

46 trillion is included in non-recurring gains and losses.

The problem of goodwill was resolved in one go in 18 years and 19 young people entered the battle.

⑤ The company’s domestic mobile games totaled 86 in 18 years.

8.3 billion (YOY 85% +), the growth rate is far higher than the industry level, and the market share increased to 6.

48% (compared to about 3% + in 17 years).

⑥ The company plans to repurchase 300-600 million yuan, and the repurchase price does not exceed 15 yuan / share.

In April 19, the company conducted the first repurchase, and the number of repurchased shares accounted for 0 of the total share capital.

41%, repurchase price 13.


73 yuan / share, payment amount 1.

1.6 billion.

Share repurchase is intended to be used in equity incentive plans or employee stock ownership plans.

2. The company’s elaborate “three-dimensional marketing + precision promotion + long-term service” systemic traffic management new ideas, high yield + high success rate (14 years since the launch of nearly 20 self-developed models, of which monthly flow of more than 100 million accounts for more than half), ARPG has obvious advantages + exploration of new categories (leisure sports / turn-based / simulation management / SLG, etc.), looking forward to continued breakthroughs in the future.

The company’s mobile game revenue for 55 years was 55.

820,000 yuan (69.

99%, accounting for 73% of total revenue), gross margin 80.

95% (+4.


[Issue angle]The domestic market has adjusted from a relatively specific “ARPG + SLG” to “multiple development”.

In 18 years, the company operated more than 5 games with a monthly flow of over 100 million, with a maximum monthly flow of over 9.

30,000 yuan, over 1 new registered users.

100 million, with the highest monthly active users exceeding 20 million.
Currently, there are 9 unique mobile games including “Sword and Reincarnation”, “Pig and Dungeon”, “Fairy 2 (tentative name)”, “Super Ball (tentative name)”, “Code YZD””,” Legend “,” Elf Festival “and other self-developed mobile games.
The overseas market continues to advance its strategic layout. China’s Hong Kong, Macao, Taiwan + Southeast Asia advantage areas, actively break through Japan and South Korea, and explore new opportunities in Europe and the United States.

[R & D perspective]The company’s mobile game R & D flow has increased by 61 in 18 years.

05%, the proportion of self-developed product revenue increased, further improving the company’s profitability.

Since 18 years, the company has launched more than 10 self-developed mobile games, such as “Douluo Land” and “One Blade Passed Down”, and achieved monthly sales of over 100 million.

At the same time, the company carried out a series of iterative updates on the long-term boutique products that have been launched.

3. Profit forecast and investment grade: We estimate that the company’s net profit attributable to its mother in 2019-2021 will be 18 respectively.



40,000 yuan, the corresponding EPS is 0.



13 yuan, corresponding to the current PE is 16/14 / 12X, maintaining the “recommended” level.

Risk reminder: policy risks in the gaming industry, increased competition in the industry, the life cycle of old products is less than expected, new product launch progress and market performance are less than expected, user acquisition costs and IP copyright prices further increase, core talent loss, player preference changes, new technologiesThe change was less than expected, corporate governance structure risks, lifting the ban and reducing risks, market style switching, etc.