Lemon WeChat: a game supports high performance promotion fees and weak user growth.

like most game companies, Lemon WeChat also bears the halo of" ultra-high gross profit margin ". According to the prospectus, in the first quarter of 2014-2017, lemon Weiqu's gross profit margin reached 95.15%, 94.04%, 97.71% and 97.57%. It is worth noting that the new three-board game company God Entertainment's gross profit margin in 2014-2016 was 98.49%, 93.06% and 92.5%, while Soul Network's gross profit margins in 2015 and 2016 were 94.63% and 85.18%. Lemon, whose gross profit margin remains high, is equally strong. According to the data, in the first quarter of 2017, Lemon Weiqu achieved an operating income of 90.6202 million yuan, with a net profit of 12.747 million yuan in the same period. From 2014 to 2016, the operating income was 11.1937 million yuan, 48.893 million yuan and 19.3679 million yuan, while the net profit in the same period was 2.3531 million yuan, 1.566 million yuan and 60.91 million yuan. Based on this calculation, the revenue of lemon Weiqu increased by 2.96 times year-on-year in 2016, and the net profit increased by 37.88 times compared with the same period last year.

< strong > A game supports a company < / strong > < strong > registered user growth is weak < / strong >

it is worth mentioning that the beautiful performance of Lemon WeChat is actually supported by the game product "bingo elimination". It was revealed that bingo consumption accounted for 100 per cent of current operating income in the first quarter of 2017, compared with 94.65 per cent in 2015 and 99.67 per cent in 2016. An investment consultant said in an interview with reporters: "Lemon WeChat products have a single structure, which means that the ability to resist market risks is not strong." If there is a decline in player stickiness and loss of players, or if the company fails to successfully develop and promote new game products, then its sustainable profitability is easily affected. "

the reporter also noticed that lemon WeChat, the "bingo elimination", is not very competitive, and its market share is not only faced with the encirclement and suppression of similar games, but also shows the characteristics of weak growth in its own registered users.

it is understood that in 2015, 2016 and the first quarter of 2017, the cumulative number of registered users of Bingo Xiaoxiao increased by 1431.81%, 210.16% and 22.11% respectively compared with the end of the previous period. For the entire elimination game industry, the larger market share in addition to "bingo elimination", there are "happy elimination category" and "Aixiaochu", developers are Le element and Tencent's Timi Studio Group T1 studio.

the above investment consultant explained: "this kind of elimination games have the characteristics of serious homogenization and prone to rampant piracy, which leads to weak user stickiness and strong substitutability."

< strong > Marketing promotion fee "smashed out" the user base invested a total of nearly 100 million yuan in the past two years < / strong >

as of March 31, 2017, the cumulative number of registered users of "bingo elimination" exceeded 146 million, the cumulative number of paying players reached 6.6946 million, and the cumulative recharge of players exceeded 623 million yuan. So how did bingo eliminate such a large user base be established? The investment adviser told reporters: "it was almost hit by advertising."

Lemon WeChat mentioned in its prospectus that in order to gain more users, the company has invested more marketing expenses since 2015, which has led to a sharp rise in sales expenses in the same period. According to the data, the sales expenses in the first quarter of 2015-2017 were 25.7453 million yuan, 82.0836 million yuan and 40.4359 million yuan respectively, of which the marketing and promotion expenses were 24.8583 million yuan, 72.651 million yuan and 346.353 million yuan respectively, accounting for 86.18%, 88.5% and 85.66% of the sales expenses in the same period respectively. In terms of sales expenses, lemon micro-interest rates from 2014 to 2016 were 12.47%, 52.86% and 42.38%, respectively, while the average values of comparable listed companies in the same period were 16.92%, 41.95% and 11.99%, respectively. As for the form of promotion, Lemon WeChat mainly includes information promotion and delivery on network information platforms such as Tencent Tencent Ad solutions and Weibo fans; advertisements have been implanted in many popular variety shows such as Hunan Satellite TV and Oriental Satellite TV; and has hired Zhao Liying and other performing stars to endorse the ads for "Bingo Elimination". In addition, the creative insertion of online dramas and the promotion of offline billboards are also widely used by Lemon WeChat.

< strong > R & D investment as a percentage of revenue plans to develop 6 game products < / strong >

in order to improve anti-risk ability and enrich product variety, Lemon WeChat launched" Monster Elimination "in May 2017. it is also understood that this is an elimination game. As of the date of signing the prospectus, the game had nearly 1.5 million registered users, with the highest number of daily active users exceeding 400000.

in addition, Lemon WeChat also plans to develop six major game products, including two new elimination games, two leisure competitive games, and two simulation games, which plan to raise a total of 626 million yuan, of which the R & D cost is 114 million yuan, of which the salary of R & D personnel is about 33.667 million yuan, the training fee is 810000 yuan, and the cost of network asset purchase is about 79.06 million yuan. The prospectus shows that after raising funds, the lemon micro-interest plan will gradually increase the input of relevant personnel according to the progress of the project implementation. It is understood that as of March 31, 2017, lemon WeChat has a total of 97 employees, while the planned staffing of the six newly developed game products is 240, of which 150 are new employees. The number of R & D personnel increased by 135.

it is worth mentioning that the proportion of R & D investment in revenue of Lemon WeChat is decreasing year by year. According to the prospectus, in the first quarter of 2014-2017, lemon WeChat's R & D investment was 3.1682 million yuan, 7.0324 million yuan, 14.224 million yuan and 5.8711 million yuan respectively, accounting for 28.3%, 14.38%, 7.34% and 6.48% of the current operating income, respectively.

< strong > Jinshan Security and Lingang online transfer shares < / strong >

the reporter found from the Lemon WeChat prospectus that the company has agreed to transfer shares many times since December 2016. Among them, Jinshan Security transferred its 1.92 million shares to Sequoia Shengde at a price of 49.92 million yuan, and Langang online transferred 1.2 million shares to Blueprint Tianxing, Nanshan Blue Moon and natural person Kong Yi with a value of 31.2 million yuan. It is understood that 08267.HK, a veteran in the game industry, successfully landed on the Hong Kong Stock Exchange on December 30, 2014. its game works include "Dawn", "Sword of the King", "Shushan Ji" and so on.

according to experience, if the listing of lemon WeChat A shares is successful, its valuation will most likely be improved. But on the eve of lemon IPO Jinshan Security and Blue Port online insisted on the transfer of equity reasons, many investors said "too do not understand", and the reporter tried to contact the office of lemon WeChat Dong Secretary, but as of the press release the phone has not been answered.

Edit: mary