"Yuan universe", a "big cake" drawn online in Chinese?

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Source:Blue whale Finance

Compared with the discussion of whether the meta universe world can have a place in Chinese online ten years later. Perhaps its ability to maintain its growth momentum is more critical at the moment.

Source: Oriental IC
In the second half of last year, the concept of meta universe was popular for a time. Chinese online is keenly aware of the market trend and constantly releases the signal of layout meta universe. Its share price doubled in a month as related concepts were hyped.

In the 2021 annual report, Chinese online realized the turnaround of deducting non net profit. In the financial report, it directly takes the meta universe as a long-term development strategy.
This company, which lost 2.1 billion yuan in the first two years, will "take off" through the yuan universe?

Brilliant performance

The performance of Chinese online in 2021 can be called brilliant.

In 2021, the revenue of Chinese online was about 1.189 billion yuan, with a year-on-year increase of 21.82%; The net profit attributable to the shareholders of the listed company was about 98.79 million yuan, a year-on-year increase of 101.93%. While the revenue exceeded 1 billion yuan, it also achieved double growth in revenue and profit.

At the same time, the net profit of Chinese online after deducting non recurring profits and losses was 23.4389 million yuan. This is the first time since 2018 that chinaonline has turned its net profit into profit after deducting non profits.

In the financial report, compared with the performance, Tong Zhilei, chairman of Chinese online, once said, "1 billion revenue can only prove that our past layout is correct. Where will the content industry go in the next decade? Where will Chinese online go in the next decade? This is a question that my team and I think more about."

For this question, Tong Zhilei's answer is meta universe. He said, "with more than 10 years of determination and determination, we will continue to work and invest in one direction. This concept will lead us to success in the meta cosmic era."

Tong Zhilei's words have the flavor of Zuckerberg's speech when Facebook was renamed. Since October last year, the layout of Chinese online in the meta universe has indeed been rapid.

In response to investors' questions, he said that he had applied for trademarks such as Chinese metauniverse, IP metauniverse, 17k metauniverse and so on. In the financial report, he said that the "meta universe essay competition" launched by the company for global excellent writers will select the first batch of story IP with meta universe content form, and has received more than 10000 meta universe literary works so far. On April 16 this year, chinaonline also jointly established the "meta cosmic culture laboratory" with the school of journalism of Tsinghua University.

With a series of actions, Chinese online took the lead in reflecting the stock price.

In October, which frequently pursued the hot spot of Yuan universe, the share price of Chinese online once hit 19.88 yuan, a new high since 2017. Today, although the share price is halved from the peak, in terms of valuation, Chinese online is still higher than its competitors in the same industry.

The main business of Chinese online is digital content production and authorization, IP cultivation and derivative development. Its main competitors include reading group and palm reading technology. According to the calculation of static PE closing on May 6, the static PE of Chinese online after the stock price fell was nearly 60 times. The industry leader reading group, whose revenue in 2021 is nearly 8 times that of Chinese online, has only a P / E ratio of 14 times. The static PE of palm reading technology, which is listed on the A-share market, is only about 38 times in 2021, and the revenue and profit of palm reading technology are nearly twice that of Chinese online.

From this perspective, metauniverse may have become the biggest card of Chinese online. But is that really the case?

Speculation concept?

Although we put metauniverse into a long-term strategy, at present, metauniverse has not brought substantive help to Chinese online for the time being.

Dismantling the revenue composition of Chinese online, its cultural business is still the absolute main business, with a revenue of 1.138 billion yuan accounting for 95.69% of the total revenue. The outstanding performance in 2021 is mainly due to the 25.19% year-on-year growth of this part of revenue; At the same time, its operating costs also decreased by 3.51% year-on-year. In contrast, the education business, as the second main business, fell sharply by 34.81% year-on-year.

Further, what really drives the performance growth of Chinese online is the performance of several specific regions. Among them, in East China, the main business, the revenue increased significantly by 70.1% year-on-year; North China and South China also increased by 13.81% and 36.66% respectively.

In the financial report, Chinese online also separately mentioned overseas business, saying that "there has been a very solid overseas business foundation". In 2021, its overseas business revenue increased by 15.34% year-on-year.

In fact, looking back on the actions of Chinese online in 2021, I'm afraid that the shares of Shanghai Yuewen, Shenzhen Litong and Baidu Qimao are more critical than yuanuniverse.

In January last year, Chinese online announced that Shanghai Yuewen, Shenzhen Litong and Baidu Qimao had become shareholders holding more than 5% of Chinese online by signing share transfer agreements with tus Huachuang and Jianshui Wenrui respectively. In the announcement, Chinese online and reading group unanimously confirmed that the two sides will cooperate in many fields, such as distribution right, development right and deduction right, priority cooperation right, distribution of reading works, promotion and release of new media CPS, safety review service, overseas business and so on. The main content of the business cooperation agreement with Baidu Qimao shows that Chinese online will grant Baidu Qimao and its affiliates the full amount of works and audio copyright that can be authorized to the free reading platform, and spread them on Baidu Qimao platform and its affiliates. Both institutions play an important role in the channel and distribution of Chinese online.

The focus of the financial report, metauniverse, has not yet brought substantive help to Chinese online. In the financial report, it also pointed out that "the company has carried out the layout of metauniverse, but it is still in the stage of exploration and attempt." In other words, the performance growth of Chinese online can not form a causal relationship with the layout of its meta universe for the time being. The surge in share prices may be more of a "blueprint" that investors spend money on.

With the growth of performance, compared with the influx of investors, the major shareholders of chinaonline seem to be particularly "rational". During the sharp rise of share price in October, the shareholder of Chinese online Jianshui Wenrui Enterprise Management Co., Ltd. reduced its shares and completed the liquidation in November. In December, the shareholder Beijing tus Huachuang Investment Consulting Co., Ltd. and its controlling shareholder began to reduce their holdings. By March 7 this year, it had reduced its holdings of 5.79 million shares.

The more important action comes from Tong Zhilei. In October last year, it announced that it would transfer no more than 3% of the total share capital of the company to Guangzhou Xuanyuan Investment Management Co., Ltd. - Xuanyuan Yuanding No. 6 private securities investment fund in the form of block trading, and the only holder of Xuanyuan Yuanding No. 6 private securities investment fund is Tong Zhilei. The transfer will be implemented from March 25 this year.

This seems to be a "left-handed down right-handed" approach. Relevant reports believe that it may be to reduce its holdings in a more hidden way. According to the relevant provisions of the CSRC, the reduction of shareholders holding more than 5% must be announced in advance, and if the shareholding ratio is less than 5%, the above provisions need not be observed. Therefore, when the news was released last October, many netizens thought it was a signal of reduction.

In fact, founder Tong Zhilei had previously reduced his stake in Chinese online. In March 2020, Tong Zhilei reduced his shares twice through centralized bidding, and cashed out 2.4123 million yuan in total.

This time, will the meta universe be cashed out by Tong Zhilei through speculation? Next, Tong Zhilei's shareholding ratio may be an important aspect.

Ten years into the meta universe, is that enough?

It is undeniable that metauniverse is indeed the current hot spot, and many Internet giants have also invested in it.

But the role of Chinese online is more like "drinking soup" than "eating meat". From the perspective of its layout, it is more about the layout of digital content. Whether this part of content needs the carrier of meta universe needs to be verified. More importantly, Chinese online content does not have an absolute moat. As one of the organizations engaged in digital reading, there is still a gap between Chinese online and reading group and palm reading technology. Among them, palm reading technology also made it clear to pay close attention to emerging industries including metauniverse. Even if the meta universe really comes in ten years, the current competitive strength of Chinese online is not prominent.

From the financial report, the hidden worries of Chinese online are also more obvious.

Although we attach importance to metauniverse, Chinese online has not been very prominent in R & D investment. In 2021, its R & D investment was only 119 million yuan, accounting for 10.05% of revenue from 16.16% in 2019. In the first quarter of this year, although R & D investment was increasing, the expenditure of 33.8505 million yuan was still the lowest of the three fees. According to the previous disclosure of Chinese online, it has established a 65 person meta universe team, including relevant personnel of the company's literature division, IP division, intellectual property division and R & D center. For a completely emerging industry, such investment and personnel scale are obviously far from enough.

From the perspective of the company's strength, although the overall profit in 2021, chinaonline has experienced the failure of acquiring chenzhike project before, and it is still in a climbing period. In the first quarter of this year, its revenue was 231 million yuan, a slight increase of 5.69% year-on-year; At the same time, there was a loss of 16.1598 million yuan.

And its cash situation is also under pressure. At the end of the last three years, the total book value of accounts receivable, long-term accounts receivable and long-term accounts receivable due within one year were 199 million yuan, 172 million yuan and 146 million yuan respectively. As of the end of the first quarter of this year, the balance of cash and cash equivalents in its hands was 256 million yuan. By the end of last year, its balance of cash and cash equivalents was 401 million yuan - a sharp decline.
There is no doubt that from the scale to the overall strength, there is great uncertainty whether Chinese online can really seize the first opportunity in the meta universe. As its risk warning said, there is great uncertainty about the future implementation progress of the project and whether it can meet the expectations, and it does not have a significant impact on the company's short-term operating performance.

Compared with the discussion of whether the meta universe world can have a place in Chinese online ten years later. Perhaps its ability to maintain its growth momentum is more critical at the moment.

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