People.cn (603000):Blue sea product and brand influence, An Internet media operation giant发布时间：2014-05-07 研究机构：中信证券国际
An omnimedia cross-platformcompany with core brand value:the Company is a media platform company with core brand influence. Based on its brand advantage, it boasts an exponential growthin advertisingrevenue and mobile added value, which builds its media platform competitiveness. Thanks to its inorganic development and presence in online lottery and online reading, and acquisitionof Guqiang Technology and Okooo.com, its brand value has further improved. In2013, itraked in Rmb1.028bn in turnover (+45.18% YoY), and Rmb273mn in net profit attributable to parent company (+29.75% YoY).
As online entertainment lottery leads themarket, media operation brands will stand out. In thecontext of increasingly diversified models of online entertainment, thanksto relaxed lottery policies, bumper year for sports in 2014, and other sector catalysts, onlinelottery field has entered an exponentialgrowth period, so we forecast that online lottery sales value will hit Rmb63-67bn in 2014E. In our view, in currentcontextwith exponentialgrowth in informationquantity, media operation has entered a stage where brands will stand out, and authoritative and in-depth content will represent the developmentorientationof brand media operation in future.
With great efforts for online lottery, the Company is expected to makebreakthroughsinmaterializationof its value in multiple fields.In Aug 2013, Okooo.com became a sub-brand under the umbrella of the Company. The Company operates in thetier-1 line-up in theonline lottery market. In particular, it boasts a leadership in thesports competitive lottery market. In 2014E, mobile Internet lottery will surge with theadvent of the FIFA World Cup, UEFA Champions League, etc. Relevantbusiness of theCompany is projected to registeranexponential growth, and its lottery sales value is optimisticallyestimated to exceed Rmb3bn in 2014E. We believe that incorporation of Okooo.people.cnmarks an important breakthrough in materialization of the Company’s’value, and an importantfoothold for its strategyfor inorganic expansion.
The Company will keep proceedingwith its strategyfor inorganic expansionto penetrate into more Internet vertical fields.Vertical application will deepen media operation and further improve brand value. We forecast thatthe Company is expected tomake positive presence in education, medicaltreatment, games, animation and other vertical fields. It is projected to consistently follow the path to its brand value materialization, and make consistent breakthroughs in inorganic acquisitionsin 2014E. We firmly believe that as a media platform with core brand value, the Company will make great efforts for mobile Internet business, and continue to rapidly grow into an omnimedia cross-platformplayer with core brand value along with vertical fields where it makes strategic presence in theindustrychain.
Potential risks:(i) impact of economic fluctuations on advertising business growth, (ii) fluctuations in revenues from Internet and mobile Internet projects, and (iii) new business development.
Earnings forecast and valuation:Given the rapid growth in the Company’score business, and consistent advancementin its strategy for inorganic expansion,we reiterate its 2014/15/16E EPS ofRmb1.55/2.09/2.71.Itis trading at Rmn72.42per share, implying 2014/15/16E PE of 47/35/27x.Asa domestic Internet player with the most outstandingcore brand value, itboastsa robust growth in its businesses (especiallyexponential growth in mobile value-added business), and its inorganic expansion is expected toconsistently accelerate. Based on local valuation method, the value of its media platform is expected to stand at Rmb20bn, and thatof its Internet product platform mainly underpinned by online lottery business to comein at Rmb10bn, so we believemarket cap of Rmb30bn is fair for it in 2014E (implying target price of Rmb115). We reiterate “BUY”rating, and advise investors to continue to watch for its medium-term value.