Source | Star Wealth
On 12 April 2022, the Hong Kong stock market continued its relatively weak trend, with the Hang Seng Index and the Hang Seng Technology Index down 0.39% and 0.68% respectively in early trading as of press time. However, there is a sector in the Hong Kong stock market that suddenly "riots" and maintains a strong upward trend as a whole, and this sector is the online game sector.
According to statistics, 17 individual stocks in the Hong Kong online game sector maintained their gains in the morning, of which the fingertip jump rose by 16.18% to the top of the list, and Flying Fish Technology rose by 10.17% to rank second. Other well-known Internet game companies such as Bilibili-SW, Cmotok, Heartbeat Company, NetEase-S, Tencent Holdings, and Celadon Games rose by 8.94%, 8.41%, 8.02%, 3.23%, 3.22%, and 0.23% respectively.
Source: ifind
1
After 8 months, the game was loosened
A total of 45 models were issued
The collective "riot" in the game sector is related to the sudden major benefits of the industry, and on April 11, the official website of the State Press and Publication Administration announced the latest batch of domestic online game approval information. A total of 45 games received version numbers. This is the first game version number released by the State Press and Publication Administration since July 22, 2021, with a gap of nearly 8 months.
It is understood that the first batch of domestic online game version numbers will resume issuance in 2022, involving a number of listed companies such as Heartbeat Company, 37 Interactive Entertainment, and Gigabit. In the first half of 2021, the domestic newly issued game version numbers maintained an average monthly level of about 80+, but since August 2021, the domestic game version numbers have been in a state of suspension. Since 2021, regulators have also issued a series of regulatory policies for the game industry, covering the protection of minors, gameplay and content, game approval, game promotion and other aspects. After more than 8 months of strengthening governance, the domestic game version was resumed and distributed in April 2022, and a total of 45 games were reviewed this time, involving listed companies including heartbeat company "Party Star", 37 Mutual Entertainment "Dream Voyage", Gigabit/Thunder "Tower Hunter" and "Box Fission", Youzu Network "Junior Three Kingdoms: Pocket Battle", Jinshan/Xishanju "Sword Net 3 Origins", Dream Creation World "Beware of Fire Candles", Friendship Time/Fun Friends "Zero Ruins", Zhongqingbao "Cast Timemaker", Baidu "Attack on rabbits" , the red game "The Way Forward" (developer Qian Qian Network (Kaiying Network Investment), Tencent Technical Support) and so on.
List of domestic online game review information:
Source: State Press and Publication Administration
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In the past three years, about 3300 version numbers have been approved
Encouraging going to sea will become a long-term path
According to statistics, since 2019, the State Press and Publication Administration has approved a total of 3352 game version numbers, of which 1365 in 2019, 1308 in 2020 and 679 in 2021, respectively, and the number of version numbers continues to shrink. In 2016 and 2017, the approved game version numbers were 4050 and 9369 respectively.
This isn't the first time the gaming industry has struggled to wait for a release. As early as April 2018, the game version number was suspended for about 8 months, and after the resumption of distribution in December of that year, the approval of the version number was significantly more stringent, and the number of approved game version numbers was significantly reduced compared with before the suspension.
The duration of the suspension of approval for this round of editions is basically the same as that of 2018.
Source: State Press and Publication Administration
According to the "2018 China Game Industry Report" jointly released by the Game Working Committee (GPC) and Gamma Data (CNG) of the China Music and Digital Association, the growth rate of the game industry in the overall revenue in 2018 slowed down significantly in the environment of the freezing of the game industry version number and the total amount regulation. According to the report, the actual sales revenue of China's game market reached 214.44 billion yuan, an increase of 5.3% year-on-year. According to wind data statistics in this environment, among the 51 game companies listed on the domestic A-share market in the first three quarters of 2018, a total of 21 companies experienced a decline in net profit, accounting for 42%.
For the restart of the game industry version number, the agency CITIC believes that the restart of the version number has affirmed the rectification effect of the game industry in the past 8 months. For the policy orientation of the game industry, maintaining the early view, adhering to the strategy of high-quality content to the game and reducing the addiction of the game, strengthening the protection of minors, and encouraging going to sea will become the long-term development path of the game industry in the future.
For the protection of minors: At present, the proportion of minors' game flow has reached a very low level, and the length of time minors play is strictly limited.
For content and gameplay: Supervision mainly emphasizes strengthening the control of "kryptonite" (to a certain extent, strengthening the control of probabilistic payment mechanisms, eliminating kryptonism, kryptonism and excessive consumption behavior, etc.), reducing game addiction (changing various rules and game designs that induce addiction), enhancing the awareness of quality (improving the connotation of game culture, technical ability and content quality), resisting undesirable themes (resisting wrong value orientation, pornography, bloody terror, money worship, "mother cannon", "beauty" and other themes), and cracking down on "skin change" Mobile game behavior (no unauthorized change of game content, illegal operation of games, etc.) and so on.
For game approvals: Game approvals are expected to become stricter and more inclined to high-quality boutique games. The Publishing Bureau of the Central Propaganda Department issued the "Detailed Rules for the Scoring of Game Review", and began to pilot the game scoring system on April 1, after the final review of each game that applied for a version number, the game works will be scored by experts participating in the review from five aspects: "concept orientation", "original design", "production quality", "cultural connotation" and "development degree", and the scoring results will directly affect the final version number issuance. It is expected that the version number review will be more inclined to games with characteristics such as content orientation, high quality, and excellent Chinese cultural themes.
For going to sea: the policy level emphasizes cultural self-confidence and encourages excellent cultural content to go to sea. General Secretary Xi Jinping has repeatedly emphasized cultural self-confidence, insisting on telling Chinese stories well and spreading Chinese voices; the policy also encourages digital cultural products such as high-quality games to go global. China's game going to sea has made a breakthrough in stages, and it is expected to enjoy a higher degree of prosperity in the future. It is estimated that china's mobile game overseas revenue will reach 32.898 billion US dollars in 2025, with a compound annual growth rate of more than 20% in the next four years, corresponding to a doubling of space in 2021 (104%).
3
Which game companies have clearly benefited?
With the resumption of the release of game version numbers, the overall prosperity of the game industry is expected to pick up. In the future, the game industry will be more inclined to high-quality content to games, and head game companies with strong research and development capabilities are expected to maintain competitiveness. What are some of the low-valued premium game companies in the market?
Tencent Holdings: Tianmei's self-developed SLG "Return to Empire" was launched on March 29 and is currently ranked in the top 8 of the iOS game best-seller list, with long-term performance worth looking forward to; follow-up products include "Black Desert" (AppStore set on April 27), "Dawn Awakening" (version number has been obtained), "Dark Zone Breakout" (version number has been obtained), "APEX Hero Mobile Game" (opened overseas soft launch on March 8), and the agent's "Heart of Noah" (AppStore is scheduled for April 14) and "Magic Tower" Overseas version and other new games. In addition, the "DNF" mobile game has been launched in South Korea, and the game is also expected to be launched domestically in the future (time is uncertain). Tencent's advertising business is also waiting for the macro-economy to improve and the video number will start commercialization at the end of the year; Tencent Cloud's business aims to grow with high quality and its profit margin is expected to be optimized. The core business remains stable, and CITIC expects Tencent to achieve a net profit of 136.8 billion yuan in Non-IFRS in 2022, and the current price corresponds to the 2022 non-IFRS21XPE.
Source: ifind
NetEase: "Diablo: Immortal" opened reservations, AppStore shows that it is scheduled to be launched on June 30 (to be determined); follow-up products include "Roar of War" (scheduled for May 26), "Harry Potter: Magical Awakening" overseas version (expected to be launched around Q2 in Japan, Europe and the United States), "The Lord of the Rings" mobile game (expected to be launched in Hong Kong, Macao, Taiwan, Japan and South Korea in Q2), "Ghost of a Revelation" (has been obtained version number), "DeadbyDaylight" mobile game, "Forever Doom" mobile game, etc. NetEase's performance and product line are more certain, and CITIC expects NetEase to achieve a net profit of 22.3 billion yuan in Non-GAAP in 2022, and the current price corresponds to the 2022 Non-GAAP18XPE.
Source: ifind
Heartbeat company: In terms of games, FlashParty has achieved a brilliant performance in the Japanese free list, T3Arena plans to be officially launched overseas on May 26, 2022, and the self-developed reserves include: Torchlight: Unlimited (beta test in mid-April, expected to be launched overseas in the second half of 2022), Sword of Suzuran (expected to be launched overseas in the second half of 2022, and deleted on April 14, 2022), Heartbeat Town (formerly known as "Creative World" has received the version number), etc.
TapTap users and revenue growth under Heartbeat will benefit from the issuance of version numbers. Through cost control and high certainty in ensuring the commercialization of the project, the agency CITIC expects that the company will break even in 2023, and the current stock price corresponds to 15XPE in 2024 under the current performance expectations.
Source: ifind
Bilibili: Station B owns a number of unique two-dimensional games such as "FGO", "Kangong Riding Crown Sword", "Princess Connection" and so on, and is an important publishing platform for young games in China. In terms of self-development and exclusive agents, in August 2021, Station B released 16 new games (including 6 self-developed and 10 exclusive agents; in terms of intermodal transportation, with the recovery of game version numbers, the industry boom is improved, which is expected to bring a positive boost to the intermodal transport business of Station B.
CITIC expects the company to achieve a non-GAAP operating profit turnaround in 2024, with the current price corresponding to 2.4XPS in 2022.
Source: ifind
Yuwen Group: For the hidden target of the game version number, the company can extract the IP licensed game share, such as "Douluo Continent" and so on. This year's newly launched IP licensing product "Qing Yu Nian" is expected to flow 100 million to 200 million yuan in the first month. In the future, the company's head IP authorized game "Snow In the Knife Line" (photon studio development) and other head masterpieces are expected to be launched one after another, and the growth rate of subsequent IP derivative businesses is expected to increase rapidly. The agency CITIC expects the company's current price to correspond to 18XPE in 2022, and at present, the valuation of the company's IP derivative business has not been price-in by the market.
Source: ifind
【Earnings Statement】
This research report is prepared and reviewed by a member of the Research Department of Fosun Hengli Securities Limited (the "Analysts"). The Analyst hereby declares that the opinions expressed in this research report accurately reflect the Analyst's individual opinion on the Company described in the Report (the "Company") and its securities.
In accordance with the scope and relevant definitions applicable to the SFC's Code of Conduct for Licensed Persons, the Analyst confirms that neither I nor my associates hold a financial interest in the Company nor act as a senior officer of the Company as reported.