Maintain the perfect world stock buy rating, and increase the target price to 28.80 dollars

BofA Merrill Lynch today released its investment report to maintain the "buy" rating of the Perfect World stock (NASDAQ:PWRD), bringing its target price up to $28.80.

The following is a summary of the contents of the report:

After 6 months of operation, the perfect world mobile game revenue accounted for the total revenue of nearly 10%, beyond our expectations. We expect the 2015 percentage to reach 18%. Affected by the revenue sharing model, the profit margin of mobile game is lower than that of PC game. The flagship game "the Fairy" and "laughing Proud River" performance is still stable, accounting for about 30% of total revenue. We will be the perfect world fiscal year 2014 and 2015 fiscal year revenue forecast to increase respectively 2% and 10%.

While perfect world profits are on the rise, they will be offset to some extent by the increasing cost of staff. We expect that the cost of product development will account for 29% of total revenue. We set the perfect world fiscal year 2014 per share of diluted earnings to 3% to 1.7 dollars, while the 2015 fiscal year remained unchanged at $1.9.

In the quarter of 2013, the perfect World revenue was 914 million yuan, up 34%, quarter-on-quarter growth of 10%, higher than the Wall Street expected 865 million yuan, mainly thanks to mobile gaming revenue contributions. Based on non-US GAAP, net profit is 117 million yuan, below Wall Street's expected 130 million yuan. Diluted earnings per share of 2.3 yuan, less than Wall Street expected 2.7 yuan. The perfect world predicts that revenue for the first quarter of fiscal year 2014 will reach RMB 841 million to 887 million yuan, above Wall Street's expected 805 million yuan.

Valuation: We continue to maintain the "buy" rating of the perfect world stock, bringing the target price up to 28.80 dollars.