On April 29, Rastar Entertainment (300043. SZ) released its 2023 annual report, the company achieved a total operating income of 1.733 billion yuan, an increase of 7.90% over the same period of last year, and a net profit attributable to shareholders of listed companies of 27.7085 million yuan, an increase of 108.93% over the same period of last year, turning losses into profits.
According to public information, the company's main business includes games, toys and football clubs, and its main products include car models, games, TV rights, sponsorship and advertising player transfers, etc. Under the background of industrial policy support and the recovery of the cultural market, Rastar Entertainment's performance will turn losses into profits in 2023.
In the second half of the year, the product will be launched intensively to establish a new incremental foundation
During the reporting period, the company's game business achieved a main business income of 494 million yuan, an increase of 17.92% over the same period of last year, accounting for 28.52% of the total operating income, and a net profit of -13.6717 million yuan.
Compared with other categories, this type of game has the characteristics of long life cycle and high ARPU value, and at the same time, this kind of game also forms a relative threshold due to the high R&D investment and the depth of content reserves. Since entering the track in 2015, Rastar Entertainment has launched a series of products such as "Heroes of the Three Kingdoms - The Cause of the Overlord", "The Ambition of the Overlord" and "Romance of the Three Kingdoms M". In 2023, the cumulative global turnover of "Heroes of the Three Kingdoms - The Cause of the Overlord" will exceed 5.8 billion yuan, and the global cumulative turnover of "Overlord's Ambition" will exceed 1.4 billion yuan. Based on the previous accumulation, the SLG strategy game "Battlefield Without Borders", which was launched by Rastar Entertainment at the end of August 2023 and published by Tencent as the exclusive agent in Chinese mainland, exceeded 100 million yuan in the first month of the game's launch, realizing the better undertaking of the serialization of strategy games under the replacement of new and old products. According to the financial report, the annual turnover of the company's SLG strategy games in 2023 will be stable at nearly 1 billion yuan. This type of game adopts the synergistic method of agency publishing and self-development and self-development, which plays a key role in covering the fixed costs of the company's game business.
For high-quality IP products, Rastar Entertainment will also launch new and related products in 2023. At the end of July 2023, Rastar Entertainment launched "Maple Valley R: A New Definition of Classics" (Southeast Asian version of "MapleStoryR: Evolution"), which was independently developed and authorized by NEXON Adventure Island IP in South Korea, with a turnover of more than 50 million yuan in the first month of the game's launch, and achieved the top 1 on the iOS New Malaysia and Thailand free list, the top 1 on the Singapore best-selling list, and the top 2 on the Thailand and Malaysia best-selling game lists. Other game IP projects have also reached a mature stage. For example, "Breaking the Sky: The Birth of Different Fire" will obtain the domestic game version in June 2023, and "Heroes of the Three Kingdoms: Shaping Kyushu" will obtain the domestic game version in February 2024.
In the emerging Red Sea Track, the Mini Program game, Rastar Entertainment will also have a layout in 2023 to establish a new round of incremental foundation. During the reporting period, after the company's self-developed pixel art card game "Adventure Returns" was launched in China in the second quarter of 2023, it has achieved a cumulative increase of more than 4 million users in the follow-up, achieving a good reputation, and the localization version in many overseas regions has also been accumulated.
On the whole, in 2023, Rastar Entertainment's key game products have shifted from the R&D reserve period to the stage of launching new games, although there are no top games launched in the first half of the year, in the second half of the year, products such as "Battlefield Without Borders", "Maple Valley R: A New Definition of Classics" (Southeast Asian version), "Adventure Returns" and other products are intensively promoted.
"The increase in product promotion expenses has led to the fact that the game business has not generated profits for the time being. Rastar Entertainment introduced in the financial report that in the future, with the gradual release of game products represented by the IP games of "Battlefield Without Borders" and "Legend of the Three Kingdoms" in multiple regions, the marginal benefits of the products are expected to be further released, and the mini program games will be combined with the dual mode of self-built mini program game R&D studio and external custom agent distribution to achieve rapid product reserve and attract target players.
Lay out new categories of toys and increase intelligent transformation and development
It is worth mentioning that, compared with other businesses, Rastar Entertainment's toy business revenue and profit have maintained stable growth.
In 2023, the company's toys and derivatives business achieved a main business income of 387 million yuan, an increase of 2.96% over the same period of last year, accounting for 22.33% of the total operating income, and a net profit of 58.9886 million yuan, an increase of 405.06% over the same period of last year.
In this regard, the company explained that "in the context of the slow recovery of the global economy, the company's toy business product and channel structure has been further optimized, and at the same time with an active business strategy."
Specifically, Rastar Entertainment keeps up with the trend and lays out new categories of toys. In recent years, domestic building block toys have ushered in rapid development. The company is also seizing this opportunity to deploy, constantly enrich the product matrix, and continue to launch new products.
In 2023, the company has successively launched the Porsche 911 GT2 RS Clubsport25 RC car, Audi RS Qe-tron E2 RC car, Hummer EV RC car, Lamborghini STO alloy car, Porsche 911 Sport Classic, Ferrari 296 GTS, BMW 20-inch aluminum alloy bicycle and other products.
In terms of building block assembly products, Rastar Entertainment has launched building block cars such as 1:8 Maserati MC20, 1:8 Alfa Romeo F1 Team ORLENC42, 1:24 Red Bull F1 RB19, and launched Porsche 911 GT2 RS Clubsport25 assembly car, Audi RS Qe-tron E2 building block car, Red Bull F1 alloy car, etc. in the first quarter of 2024.
Rastar Entertainment said that under the innovation and empowerment strategy, the company continues to focus on product research and development and innovation, improve the added value of toy products, promote the intelligent transformation and development of toys, and take the road of high-quality development of toy intelligent manufacturing.
On the one hand, in the toy sector, the company will apply for a total of 21 patents in 2023, including 5 invention patents, 6 utility model patents, and 10 appearance patents. As of the end of the reporting period, the company's toy sector has obtained a total of 265 patents, including 13 invention patents, 127 utility model patents and 125 appearance patents.
On the other hand, the products have also won related honors, such as the 1:16 Hummer EV RC car and the 1:14 Audi RS Qe-tron E2 RC car won the "2023 Upgrade and Innovative Products" and "2024 Trend Upgrade Products" issued by the China Toys and Juvenile Products Association, respectively.
Rastar Entertainment also introduced in the financial report that with the gradual resumption of offline exhibitions, the company actively participated in the exhibition with toy boutiques, and explored new sources of customers and business opportunities in emerging markets through mainstream professional exhibitions such as the Nuremberg Toy Fair, the Hong Kong Toy Fair, the Canton Fair, the Shenzhen Toy Fair, the CKE China Baby Products Fair, and the Shantou Play Expo. (For related reports, please refer to Silver Persimmon Finance's "Video|Xinghui Entertainment, Seriously Play with Cars")
Reduce the team's operating costs and promote the application of emerging technologies
Judging from the financial report data, the football club business is one of the reasons why Rastar Entertainment's performance in 2023 is under pressure.
In 2023, the company's football club business will achieve a main business income of 789 million yuan, an increase of 11.31% over the same period of last year, accounting for 45.52% of the total operating income, and a net profit of -33.8345 million yuan, a decrease of 147.455 million yuan from the same period of last year.
"In the case of relegation, the club's broadcast rights revenue declined, which failed to cover the cost of player amortization and salary, resulting in losses, but after the implementation of cost control and structural optimization measures in the 2023/24 season, the player transfer transaction has achieved positive returns, and the football club's business loss has narrowed. The company added in the financial report.
It is understood that in 2023, the club will control costs and continue to cultivate high-level talents. For example, the club has implemented strict cost control measures, matched the team's corresponding competitive level in the new season, and implemented a reduced salary policy for most of the first-team players and coaching team, effectively reducing the team's operating costs. At the same time, in the summer transfer period, combined with the team's competitive needs and business plan, the team was adjusted by means of loan and transfer, and the player transaction business has become normalized. The club is also actively building a youth training system and has won a number of excellent youth training results.
Silver Persimmon Finance also noted that in Rastar Entertainment's 2024 plan, the company emphasizes integrating the landing and application of emerging technologies into its business development strategy.
Among them, the game business is the main force for the in-depth application of AI technology. At present, Rastar Entertainment has applied AI-related technologies to AI drawing, scene modeling, intelligent NPCs, cutscene animation design, etc. in the game development process, and used AI text production videos to produce and distribute promotional video materials.
It is understood that in the "Battlefield Without Borders project", the R&D team trained an AI designer assistant that can simulate the final effect of the game engine. In the early stages of sketch design, designers can directly see the final effect of the game through AI, which can help quickly generate the game's cutscenes.
"In the future, we will comprehensively promote the application depth of AI technology in art design and content design, and promote its effect application in game experience and operation optimization, as well as the benefit application of purchase and material storage. Rastar Entertainment said that through AI products and service resources such as advanced external large models, and gathering industry talents for AI applications, it will further improve the company's technological competitiveness.
In the toy business, intelligence is also one of the important development trends. At present, the company has reserved VR remote control, voice remote control and other docking technologies in the dynamic toy series.
According to the financial report, Rastar Entertainment will also actively promote the in-depth combination of "toys + AI", embed artificial intelligence interactive technology into products and their application scenarios, rejuvenate the definition of car model toys with the help of AI technology, and realize the transformation from traditional single remote control and collection toys to multi-functional, interactive and platform-based three-dimensional toys, and create an "AI smart car" of toy series.