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Zhejiang Digital Culture (600633): Game business expands to acquire Hangzhou Julun to form strong synergy

Zhejiang Digital Culture (600633): Game business expands to acquire Hangzhou Julun to form strong synergy

Performance summary: The company announced the third quarter report of 2019, and achieved revenue of 20 in the first three quarters of 2019.

100 million (+51.

3%), achieving net profit attributable to mother 4.

10,000 yuan (+3.

5%), to achieve the deduction of non-net profit3.

100 million yuan (+54.

1%), in which the single quarter of 2019Q3 achieved revenue 6.

800 million US dollars, an annual increase of 20%, to achieve net profit deducted non-attribution1.

100 million, an increase of 84% in ten years.

The expansion of the game business has driven the company’s high performance.

The high growth of the company’s performance mainly comes from: 1) the company’s acquisition of Fengyou Network Technology, Taizhou Lingyi Intelligent Technology, and Mengqi Network, etc. in 2;Have a positive impact on the company’s return to net profit.

Acquired a 40% stake in Hangzhou Julun to increase the company’s performance + form a strong synergy with Bianfeng.

Further layout of the digital entertainment industry.

At the end of October 2019, the company announced that it intends to use its own funds2.

300 million shares acquired a 40% stake in Hangzhou Julun. After the acquisition was completed, Hangzhou Julun separated the company’s consolidated financial reporting scope.

Hangzhou Julun focuses on leisure entertainment video live broadcast services, 1) In terms of users: From January 2018 to June 2019, the average monthly registered users are 31.

50,000 people, with an average monthly active user of 80.

40,000, with an average monthly recharge user of 30,000.

2) Performance: Hangzhou Julun achieved revenue in 20182.

970,000 yuan, net profit of 10.39 million yuan, 2019H1, Hangzhou Julun realized revenue 2.

3 trillion, net profit of 6079 trillion, through the gradual reduction of promotion costs, Hangzhou Julun monetization space began to open.

3) In terms of performance commitments: The non-deducted non-profit profits promised from 2019 to 2020 are not less than 108.85 million yuan and 88.21 million yuan respectively, which may significantly increase the company’s performance.

In fact, the business structure of the game (Bianfeng Network) + live broadcast (Hangzhou Julun) may show strong synergy, and Zhejiang Digital Culture as the representative company of Zhejiang Cultural Media with a state-owned enterprise background may reduce the risk of live broadcast business from the content source.

In-depth participation in Digital Zhejiang, Urban Brain Project.

1) Digital Zhejiang: According to the roadmap, by 2022, Digital Zhejiang will be established as a national digital economy demonstration province, a leading province for digital government construction, and a model province for digital society construction, supporting the basic construction of Zhejiang ‘s digital infrastructure on the cloud, supporting strong dataThe province’s data resource system is basically complete.

In the first half of 2019, the company launched the spin-off and reorganization of the government service network business center, and deeply participated in the development and construction of the digital Zhejiang project.

2) The urban brain is one of the landmark projects in Zhejiang Province to promote the “No. 1 Project” of the digital economy. It is planned to form a unique application based on the urban brain by 2022, and it will be used in transportation, safety, urban management, economy, health, environmental protection, cultural tourismAnd other fields to achieve comprehensive applications.

Earnings forecasts and investment advice.

It is expected that EPS for 2019-2021 will be 0.

44/0.

52/0.

58 yuan, based on 1) the 北京夜网 game business is continuously expanding the market; 2) participating in the Hangzhou City Brain together with the Hangzhou Municipal Government and the construction of digital Zhejiang, with the aim of achieving external replication and mining for the accumulated data during the operation of the city brainTo form a new value and maintain a “Buy” rating.

Risk Warning: Before Game Business or Big Data Project