Century Huatong: Anxin Securities, Bohai Securities and other 51 institutions investigated our company on May 6

On May 8, 2022, Century Huatong (002602) issued an announcement that: Anxin Securities, Bohai Securities, Soochow Securities, Orient Securities, Debon Securities, Northeast Securities, GF Securities, Guohai Securities, Guosheng Securities, Huaan Securities, Haitong Securities, Kaiyuan Securities, Huatai Securities, Shengang Securities, Tianfeng Securities, Pacific Securities, Southwest Securities, Western Securities, New Era Securities, CITIC Securities, CITIC Securities, CITIC Construction Investment Securities, CICC, China Merchants Securities, Zhongyuan Securities, China Post Securities, Anhe Capital, Model Investment, Founder Fubon Fund, Fangyuan Fund, Fidelity Investment, Jianshun Investment, Guotai Life, Guohua Life, Gopher Assets, Huaan Fund, Huacang Fund, Regan Fund, Longyuan Investment, Noah Holdings, Qiuyang Investment, Runze Investment, Industrial Securities Asset Management, Yinhua Fund, Sunshine Assets, Yuhui Capital, CIC Zhongcai Fund, CITIC Construction Investment Management, Shenwan Hongyuan, ABC International, Zhongtian Guofu, Xinhua Ji Xinyan Venture Capital investigated our company on May 6, 2022.

The main contents of this survey are:

Q: What are the new games in the company's reserve?

A: First of all, the "Qing Yu Nian" mobile game, which was launched in March this year based on the popular film and television literature IP, continues the company's accumulation of MMORPG games for many years, innovates leisure and fun gameplay, breaks the routine way of daily punch card to do tasks, and returns the game to the entertainment experience. This year will continue to generate flowing contributions. The second is the "Legend of the World" mobile game. At the end of last year, the Supreme People's Court's judgment on the issue of legendary copyright made it clear that it has a great role in promoting our dominance of domestic legendary track games. "Legendary World" is a legendary MMORPG boutique mobile game based on the UE4 engine for the first time, from the scene to the character, from the light and shadow to the costume, will bring players a wealth of visual enjoyment, in addition to the first use of particle system with rigid physical collision, and create a gorgeous and incomparable sense of combat blow. Coupled with the inscription cultivation system that many players have come to expect, as well as the new gameplay of social attributes, all the innovations and upgrades will make this work a competitive title on the legendary track. "Dragon Valley International Edition" mobile game, the latest masterpiece of classic IP, re-reproduced its unique operation mode, fantastic game screen, refreshing combo combat and intense PVP experience. "Famine: New Homeland", famine IP-related works, has sold nearly 20 million copies worldwide, in one fell swoop has become a benchmark for independent games in the sandbox survival category, its unique art style and gameplay also let the IP have a deep influence, in the global player group has established a good reputation, this new work "Famine: New Homeland" on the basis of the classic gameplay to add Roguelike, multiplayer mode and other new content. Jojo's Bizarre Adventure is a hall-of-fame manga, and anime, novels, and movies based on his manga IP have also been hugely successful. Jojo IP has an extremely deep fan base around the world and is an absolute head IP. We have acquired the rights to distribute the game in all countries and regions of the world except Japan. In addition to the above games, the company plans to have 5-7 games for overseas markets launched, including RPG, SLG, leisure, etc., such as "Project Code GOM", "Project Code WCC" and so on.

Q: There was a mismatch in last year's products, how do you view this year's performance inflection point? Is there room for optimization of fees?

A: With the launch of a number of new tours such as "Celebrating the Rest of the Year", "Legend of the World", "Famine: New Homeland", "Project Code GOM", "Project Code WCC" and so on, it is expected to boost the financial statements. With the end of 2021, the SPC's confirmation of the IP copyright of "Legend" will also help increase the licensing income. The initial investment in research and development and the global market investment in the game began to gradually cash in performance. In 2021, games such as "FamilyFarmAdventure", "Valor Legends", "Awaken: ChaosEra", "IdleMafia" and other games entered the long-term operation period of 2022 and are expected to continue to contribute to net profits. In addition, our stock products have always had a strong heritage, such as "Aion", "Final Fantasy 14", "Blood Legend Mobile Edition", "Adventure Island" and so on are evergreen works in the industry. 2021 is the company's product small year and product reserve year, the company's gross profit margin in 2021 is 54%, the same period in 2020 gross margin is 56%, this indicator fell slightly, but the decline is not large, only down 2%. The decline in the company's net profit in 2021 was mainly due to the impact of interim expenses. Among them, the increase in R&D expenses is mainly due to the reserve of talents and follow-up self-developed products, and the increase in sales expenses is also due to the early investment in overseas self-developed products, especially the increase in Q4 sales expenses is because of the early purchase of overseas products, which are short-term cyclical effects, and related products will also enter the positive return cycle this year. In addition, the increase in management expenses is also due to one-time expenses arising from the disposal of assets, which will be optimized this year.

Q: How to understand the overseas market? And will you invest in some quality overseas teams?

A: From a strategic point of view, the domestic game industry user coverage has been very wide, payment habits and preferences have basically formed a fixed model, the market is relatively mature, stable and growing, the requirements for game quality are getting higher and higher, the competitive pressure is relatively large, coupled with the concentration of online traffic platforms, many game manufacturers want to open up overseas. The overseas mobile game market has always been the strength of domestic companies, whether it is technical practice or commercial design. To generate income at sea, the basic logic is still the product is king, and the boutique game is supplemented by good promotion and operation, and finally gets the recognition of users. When the early overseas market had not yet broken through, the product was relatively scarce, and a little bit of localization of the art style, coupled with the purchase volume of the market, basically pushed the product to the top of the list. In this era, with the intensification of competition, first of all, the product must not have a short board, and secondly, there must be special strengths, such as gameplay, values, art, etc., in order to obtain a better income performance. Our overall idea is still product king, boutique + self-research spontaneous. Our ranking of overseas game products continues to rise, and we will continue to focus on each category and develop 1-2 products. On the investment side, if we have the right team, we will consider investments and acquisitions.

Q: Is the idea of going to sea around the regional layout or around the theme of the product itself to do the global layout?

A: We are still product-oriented. The company has a deep understanding of the user preferences of the world's major markets, and at this stage, to ensure the success rate of products, it will carry out project calculations and adhere to high-quality products.

Q: How do games and IDC businesses work together?

A: The game business is essentially related to the IDC business, and now the cloud game is gradually developing, the demand for cloud computing power and data storage is very large, the game manufacturers have the need to rent cabinets and push cloud games, and the future host, PC, and mobile game are all connected at the three ends, all on the same server, the test of the cloud is very large, and the IDC business is the upstream data infrastructure of the game. Now the concept of metaverse is hot, the game industry is a very important entry point, in the toB field has not yet matured, entertainment, culture is the early can promote user payment of products, this aspect of the relevance is very large, need to rely on cloud computing power, AI digital twin, graphics rendering and processing capabilities, in order to achieve the application scenario, the game is the content, IDC is the foundation.

Q: How is the long-term investment value of a company assessed?

A: Our vision is to become the world's leading technology and culture company, focusing on scientific and technological innovation. In the cultural field, the game business is able to generate long-term stable income and cash flow. Overseas dollar funds in the past few years felt that the game industry volatility risk is very large, there are doubts, but since the second half of last year, the global dollar fund has invested heavily in the game industry, began to buy AAA studios or research and development companies. The most core of the game industry is the team asset, and good teams have a greater probability of making high-quality games. Overseas dollar funds or domestic manufacturers have increased their investment in the game industry, and they have also seen the development space of the game industry. At present, there is still a lot of room for improvement in the way and form of the game is presented, based on the needs of users, the future hopes to see a highly anthropomorphic AI, and the game industry still has a lot to explore and explore. In the field of science and technology, we have invested in and deeply participated in the Tencent Yangtze River Delta Artificial Intelligence Advanced Computing Center project, which is the core computer room of Tencent Cloud in East China, and the Shenzhen data center project we purchased will also become an important computing hub for the company to serve the Greater Bay Area. The company will continue to copy the construction and operation experience of Tencent's Yangtze River Delta Artificial Intelligence Advanced Computing Center project, give full play to the advantages it has mastered in internet data center investment, construction and operation, continue to expand the layout of single ultra-large-scale computer rooms in key core areas of the country, and provide safe, stable, reliable and efficient full-life cycle Internet data center services for Internet enterprises, cloud service providers and other customers, contributing to the national digital construction. Based on the rapidly growing market demand in the field of data security, the company has established in-depth cooperation with Viston to jointly expand data security compliance service solutions and service capabilities for various Internet application scenarios, and improve network data security protection capabilities to better meet the compliance requirements of data security.

Q: How does the company view the development of the game industry in the meta-universe era, and what layout has been made for this company?

A: The rise of the metaverse is not only supported by technical and iterative factors, but also by the needs of the real world, and the metacosm is not exactly a virtual world, but to improve the efficiency of society by building a world born of virtual reality. But at present, the development of the metaverse is still in a very early stage, still facing problems, one is to solve the problem of the underlying engine of the metaverse, the development of various applications needs the support of the underlying engine; the second is to improve the ability of AI and machine learning, the metaverse needs a lot of content creation, these creations will not rely entirely on people, will combine more AI, machine learning means. The advantages of game companies are three points, one is that game companies have complete game engine and platform development capabilities, can design users' favorite interaction methods, to bring users a better sense of immersion; second, the current digital twin field is widely used Unreal, Unity engine has previously served the game industry, the use of engines is the strength of game companies; the third is the commercialization ability, in the early metaverse, game companies involved in can stimulate C-end users' desire to pay, It brings a virtuous commercialization cycle to the entire metaverse ecology and empowers upstream and downstream. At present, we are on the track of meta-universe games, on the one hand, through our own technical middle platform to make relevant technical preparations, on the other hand, through the investment in the layout of some hardware and technology upstream and downstream companies, together to define the future of meta-universe game products, to promote the development of the entire meta-universe industry. In addition, our data center project will also become a very important data storage and computing center in the future metaverse world. In terms of meta-universe games, "LiveTopia", which we launched on the Roblox platform, has more than 40 million monthly active users and more than 100 million total users since its launch last year, and has become a phenomenon-level meta-universe game.

Century Huatong's main business: Internet games, auto parts manufacturing and Internet data center ("IDC") section.

Century Huatong's 2022 first quarterly report shows that the company's main revenue was 3.52 billion yuan, down 11.92% year-on-year; net profit attributable to the mother was 209 million yuan, down 64.29% year-on-year; deducting non-net profit was 206 million yuan, down 61.06% year-on-year; among them, in the first quarter of 2022, the company's single-quarter main revenue was 3.52 billion yuan, down 11.92% year-on-year; single-quarter net profit attributable to the mother was 209 million yuan, down 64.29% year-on-year. In the single quarter, the non-net profit was 206 million yuan, down 61.06% year-on-year; the debt ratio was 20.77%, the investment income was 10.1631 million yuan, the financial expense was 72.7789 million yuan, and the gross profit margin was 51.16%.

The stock has been rated by 5 institutions in the last 90 days, 4 with a buy rating and 1 overweight rating; the average target price of the institution in the past 90 days is 9.59.

Here is detailed profit forecast information:

Margin data shows that the stock has a net outflow of 467 million yuan in the past three months, and the balance of financing has decreased; the net outflow of margin is 5.6698 million, and the balance of margin is reduced. The Securities Star Valuation Analysis Tool shows that Century Huatong (002602) has a good company rating of 2 stars, a good price rating of 2 stars, and a comprehensive valuation rating of 2 stars. (Rating Range: 1 ~ 5 stars, maximum 5 stars)

The above content is compiled by Securities Star based on public information, if you have any questions, please contact us.