The perfect World stock overweight rating, the target share price is 15 dollars

The following is a summary of the report:

Because of the new game "The Holy Warrior Star ol" and "No Winter Night Ol" performance is strong, the perfect world in the second quarter of this year's revenue exceeded expectations. But per-share earnings (EPS), as measured by US General Accounting Standards (GAAP), coincide with Wall Street expectations, largely because of the higher royalties on these two new games, which led to a fall in gross margins. Third-quarter guidance revenue also exceeded expectations. The perfect world-wide new game mix began to work, with the average number of online users in the second quarter increasing to 742,000 from 554,000 in the first quarter of this year, while the existing game "ACU" (Accounting for 20% revenue) and "Perfect World 2" (Accounting for 10% revenue) showed relative stability. We give the perfect world stock overweight rating, with a target share price of 15 US dollars (4.6 times times the earnings ratio of EPS plus net cash per share for the 2014 fiscal year).

Second-quarter revenue higher than expected, EPS meets expectations

Because of the new game "Saint Star ol" and "No Winter Night Ol" strong performance, the second quarter revenue of 115.4 million U.S. dollars, more than we and Wall Street, 109 million U.S. dollars forecast. The GAAP EPS is $0.27 trillion, which is consistent with Wall Street forecasts, above our projected $0.21 trillion. The gross profit margin for the second quarter was 75.5%, below our forecast of 79.1% and 81.3% over the same period last year, mainly because of the higher royalties from the two new games.

Third quarter guidance revenue exceeded forecast

The new game "The Holy Warrior Star ol", "No Winter Night Ol", "Smile AO Lake ol" The entire third quarter can create revenue, so guidance revenue between RMB 779 million to 815 million yuan (126.9 million to 132.8 million U.S. dollars, the chain Rose 10% to 15%), Above our projected 109 million dollars and Wall Street forecast of 1.17 dollars.

Rich game mix foreground to good

The perfect world in the second quarter released three self-developed 3D MMORPG game: April in the United States and Europe issued the "No Winter Night Ol", May released the "Holy Warrior Star-ol", the end of the quarter issued "Smile AO Lake ol". We believe that these three games have shown strong performance, laying the groundwork for good performance in the second half of this year. In addition to MMO games, the Perfect World has released a series of web games and mobile games (estimated at 1% to 2% of total revenue), and we expect to have more web games and mobile games in the coming quarter. The company's exclusive operation in mainland China, "DOTA 2" is in beta, plans to launch the fourth quarter. Other games also have the MMORPG game "Holy King" and "Shoot carving Hero biography". We expect these new games to increase the game metrics for the 2013 to 2014 fiscal year, making up for the decline in the revenue of the core game "perfect World 2" and "The Fairy". (Darcy)