Ultrapower(SZ:300002)2024-09-14 11:00Investment Rating - The report does not explicitly state an investment rating for the company Core Insights - The company, Shenzhou Taiyue, has shown impressive growth in its gaming business, with a five-year compound annual growth rate (CAGR) exceeding 50% despite a generally declining market [4][7] - The gaming segment is the primary profit driver, contributing 75.43% of total revenue and achieving a revenue CAGR of 35.34% over five years [7][13] - The company has a significant cash flow, with a net cash inflow of 31.76 billion yuan over four years, which is 1.5 times the total profit during the same period [24][26] Summary by Sections Company Performance - Shenzhou Taiyue's revenue increased from 1.78 billion yuan to 5.96 billion yuan over five years, with the gaming business alone contributing nearly 90% of this growth [7][13] - In Q1 2024, the company reported revenue of 1.49 billion yuan and a net profit of 295 million yuan, marking year-on-year growth of 22.79% and 65.62% respectively [11][12] Gaming Business - The gaming business has been supported by two main titles, "War and Order" and "Age of Origins," which together generated over 10 billion yuan in revenue [15][18] - Despite the success of these titles, they are aging, with "War and Order" being five years old and "Age of Origins" eight years old, raising concerns about future revenue sustainability [18][19] Acquisition and Risks - The company made a significant acquisition of Shellwood Games for 12.15 billion yuan, with a high premium of 27 times earnings, which has raised concerns about the sustainability of its goodwill [14][20] - The company holds a total goodwill of 14.48 billion yuan, which constitutes over 20% of its total assets, posing potential risks [22][23] Dividend Policy - Despite strong cash flow, the company has a low dividend payout ratio, distributing less than 15% of its profits in cash dividends over the past four years [26][28] - The company claims a dividend payout ratio of 41.57% based on a specific calculation method, which has been met with skepticism [28][29] Management and Governance - The company has no controlling shareholder, leading to significant stock-based compensation for the chairman, amounting to nearly 400 million yuan over recent years [30][34] - The chairman's stock incentives have raised questions about governance and alignment with shareholder interests [30][34]