New games start to generate revenue, release costs to pull down profits

New games start to generate revenue, release costs to pull down profits

As a result of the new game "laughing and Proud" and "Saint Fighter star ol" began to create income, the perfect world in the second quarter of this year's revenue and third-quarter guidance revenue are higher than expected. With the release of new games leading to increased marketing costs, near-term margins will be under pressure, but should be stabilized at the current level. We expect revenue to continue to grow in the next 18 months, with a profit margin of 13% to 16%. We have slightly adjusted our target share price to $26, which is 12 times times the earnings per share for the second half of 2013 to the first half of 2014, and $7.5 per share of net cash. Risks include the rapid decline of old games such as "The fairy" and too much spending on new projects. We forecast EPS from 2013 to 2015 from a low base of 45% to 50%, but the target share price is only slightly higher due to slower growth.

We believe that "the fairy" and "Perfect World 2" and other old games are entering the mature stage, but the situation can be controlled. We also expect that the new games will account for One-third of revenue in 2014. In addition to the "Smile and Lake Ol" and "Saint-Fighter star ol" outside, the perfect world also launched the "Holy King", "No Winter Night Ol", "Dota 2", "Carving Hero Biography" and other games. Because of industry differentiation, we are more conservative in the prediction of mobile games.

Second-quarter revenue growth, lower profit margins

As the "Holy Warrior Star Ol" and "No Winter Night Ol" in Europe and the United States, the perfect world's second quarter of this year's revenue of 709 million yuan (115.4 million U.S. dollars), the chain growth of 14%, year-on-year growth of 5%, higher than the average forecast of 679 million yuan (111 million U.S. dollars). Net profit of 81 million yuan (13.22 million U.S. dollars), EPS for 0.27 U.S. dollars, less than Wall Street forecast of 84 million yuan (13.71 million U.S. dollars) and 0.28 U.S. dollars, which is mainly marketing costs to reach 196 million yuan (32 million U.S. dollars), up 15%. Because of "smile arrogant" began to generate income, the third quarter guidance revenue growth 10% to 15%, Year-on-year 12% to 17%. We are not too worried about the increase in marketing costs because we expect that to return to normal as revenue grows. (Darcy)