"White Horse Stocks" Kaiying Network Submission: Last year's business and performance went hand in hand and are ready to go in 2024

According to the 2023 China Game Industry Report, in 2023, the actual sales revenue of China's domestic game market will be 302.964 billion yuan, a year-on-year increase of 13.95%, breaking through the 300 billion mark for the first time, and the number of users will be 668 million, a year-on-year increase of 0.61%, a record high.

In the context of the resumption of growth in the game industry, Keying Network (002517. SZ) continued its good growth momentum again, achieving significant growth in its full-year results for 2023 and the first quarter of 2024.

On April 30, Keying Network disclosed its 2023 annual report and 2024 first quarter report. According to the announcement, the company will achieve operating income of 4.295 billion yuan in 2023, a year-on-year increase of 15.3%, total profit of 1.697 billion yuan, a year-on-year increase of 22.61%, and net profit attributable to shareholders of listed companies of 1.462 billion yuan, a year-on-year increase of 42.57%;

In addition, Keying Network got off to a good start in the first quarter of this year. According to the first quarterly report, the company achieved operating income of 1.308 billion yuan, a year-on-year increase of 36.93%, total profit of 442 million yuan, a year-on-year increase of 13.60%, and net profit attributable to the parent company of 426 million yuan, a year-on-year increase of 47.06%.

Keying Network has verified its strong operating strength after strategic transformation and improved corporate governance with excellent performance. In recent years, Keying Network has focused on the R&D, production and operation of high-quality online game products, and has always adhered to the three major sectors of R&D, distribution, investment + IP, comprehensively enhanced the competitiveness of the main business, simultaneously strengthened the construction of corporate culture, and built core competitiveness, so as to continuously achieve outstanding performance. At present, Kaiying Network has entered the first-line camp of the domestic game industry.

The internal governance structure is optimized, and investors are actively rewarded with dividends

2023 is a historic year for Keying Network.

With the appointment of the new directors, supervisors and senior executives and the settlement of the new actual controller, a new management of the network was formed, which marked the complete decoupling and unbinding of the former actual controller, thus entering a new era of development.

According to public information, in July 2023, Keying Network will complete the re-election of directors, supervisors and senior executives. At the same time, the proportion of INEDs has increased to 1/2, the decision-making efficiency has been further optimized, and the level of internal control and decision-making has been significantly improved. In November of the same year, Keying Network ushered in a new actual controller, Jin Feng, and the company's equity structure was further stabilized.

According to statistics, since 2020, the actual controller Jin Feng has increased his holdings 11 times, with an increase of more than 1.5 billion yuan.

According to the analysis of Guolian Securities Research Report, the chairman's increase in holdings not only demonstrates the confidence of the management, but also marks the end of the company's nearly one-year state of no actual controller, and the company's long-term strategy is expected to be more effectively implemented.

"Investor-oriented" and actively rewarding investors have long been the practical actions of the new management of Keying Network.

In March this year, Jin Feng, the actual controller and chairman of the board, proposed a cash dividend plan for 2023, distributing cash dividends of no less than 1 yuan (tax included) to all shareholders for every 10 shares, and a dividend distribution plan of more than 200 million yuan in 2024, and the two-year dividend is expected to be about 600 million yuan.

Since 2023, regulators have paid more attention to encouraging listed companies to give back to small and medium-sized investors through cash dividends. On March 15, the China Securities Regulatory Commission issued the "Opinions on Strengthening the Supervision of Listed Companies (Trial)", which pointed out that strong restraint measures should be taken on dividends. Listed companies are required to formulate an active and stable cash dividend policy and clarify investors' expectations.

Industry insiders pointed out that dividends, repurchases, and increased holdings are not only important "anchors" for long-term investment, value investment, and rational investment, but also an intuitive representation of the high-quality development of listed companies.

It can be said that insisting on stable dividends is not only a long-term measure for Keying Network to pay attention to the interests of investors, but also a specific action to actively respond to the requirements of the regulator, and it is also a self-requirement as a first-tier game company.

The dividend distribution plan released this time is another sincere and real money reward to investors after the change of the fifth session of directors, supervisors and senior executives of Kaiying Network, which fully demonstrates the confidence of Kaiying Network in the future development of the company.

"IP+self-developed" in-depth collaboration and "mini games" open up new growth space

Through continuous improvement of corporate governance, Keying Network has been able to continuously focus on the main business of games, and has achieved remarkable results around the troika strategy of "R&D, Publishing, Investment + IP".

During the reporting period, Keying Network benefited from the stable operation of long-term products such as "Original Legend", "Gundam Battle", "Bloody Strike", "Battle of Angels" and "Eternal Alliance".

Judging from the results of the newly launched products in 2023, the company's high-quality strategy is significant, and the explosion rate continues to increase. New online products such as "New Heaven and Dragon Slayer", "The Legend of Sword and Fairy: A New Beginning" and "Stone Age: Awakening" performed well. Among them, "New Heaven and Dragon Slayer" (overseas version) quickly achieved excellent results on the iOS free game charts in Hong Kong and Taiwan, China, and after the official launch of "Stone Age: Awakening", it won the first place on the App Store's free list and the eighth best-selling list, and the industry recognition continued to soar.

In terms of IP, Keying Network further complements the company's product line by investing in other R&D studios with differentiated features and creative gameplay in addition to its self-developed product line, and promotes the formation of strong business synergies between strategic investment enterprises and the company's issuance business segment.

In terms of IP business, the company provides IP support for the company's R&D system by introducing top-level IPs that match the self-developed and good categories and tapping potential cost-effective IPs in the future.

While independently incubating the IPs of "Baigongling" and "Suiling", the company has also accumulated a large number of IP licenses through the introduction of IP strategies, including "Mobile Suit Gundam Series", "OVERLORD", "About My Reincarnation as a Slime", "Nobunaga's Ambition: Heavenly Dao", "Bloody Rivers and Lakes", "Dragon Raja", "Westward Journey", "Fengshen Series", "Heaven and Dragon Slayer", "Legend of Sword and Fairy", "Tomb Robbery Notes", "Douluo Continent", "BLEACH Millennium Blood War", "Ultraman". "The King of Fighters", "Condor Trilogy (The Legend of the Condor Heroes, The Legend of the Condor Heroes, The Legend of the Condor Heroes", "The Legend of the Sky and the Dragon)", "Red Moon" and other well-known IPs. These well-known IPs are the fulcrum for achieving product diversification, and they continue to provide a strong impetus for the company's research and development of emerging masterpieces.

In terms of follow-up product reserves, the company's self-developed products "Douluo Continent: Legend of the Evil Spirit", "Codename: Tomb Robbery", "Mecha Party", "Legend of Liangshan", "Legend of Dragon", "Codename: Nobunaga", "Codename: DR", "About My Reincarnation into a Slime: New World", "Three Kingdoms: The Heart of the World" and other products are expected to be launched in 2024, with strong certainty of performance growth.

It is worth mentioning that for the new track of small games that are popular this year and are expected to open up new market growth space, Kaiying Network has also laid out early.

By expanding emerging tracks such as IP products and mini games, Keying Network has brought classic IP to life. At present, many games such as "Original Legend", "Battle of Angels" and "New Heaven and Dragon Slayer" have been logged on the WeChat mini game platform, and the company's idle game "The Legend of Sword and Fairy: A New Beginning" has adopted the distribution strategy of first launching a mini game and then launching an APP.

According to the analysis of the research report of Industrial Securities, as the "IP treasure house" of A-share game companies, Kaiying Network has a unique advantage in the IP creation of small program games, and is expected to open up new profit growth space with a strong buying advantage.

In addition, in the field of "game +", Keying Network adheres to technological innovation as the internal driver, cultivates new quality productivity, activates new momentum for development, explores diversified functions such as "game + party building", "game + culture" and "game + medical", builds a digital cultural ecology, and helps promote social practice in multiple fields. Whether it is through the development of the anti-fraud public welfare game "Catch the Scammers" to help the national anti-fraud publicity, or through the "Kaixin Baigongling" number one player program to inject new life and vitality into intangible cultural heritage, it shows Kaiying Network's determination to persist in innovation and broaden the boundaries of games.

Anchoring new tracks and new technologies, Keying Network is poised to launch in 2024

2023 is the first year of the outbreak of AI large models. According to the "Report on the Development Prospects of AIGC in China's Game Industry", more than 60% of the leading game companies have carried out the layout of the AIGC field.

As an innovative head game company, Keying Network attaches great importance to the construction of a multi-dimensional and three-dimensional R&D system, and began to lay out the layout in the early stage of the rise of AI.

In 2023, the company will invest 527 million yuan in R&D, accounting for 12.26% of operating income. At the same time, the company adjusted the business structure of the self-developed system to achieve pipeline, standardization, modularization and automation, and further increased its investment in AIGC technology.

The company's exploration of AIGC technology adheres to the principle of pragmatism, with the goal of feeding back the core game business, focusing on the value of the middle layer and application layer of AIGC. Through targeted training and application in subdivided fields, AI can be more tailored to its own needs, and the trained AI tools can be extended to the entire system for application, expanding use scenarios and improving efficiency.

In April 2023, Keying Network and Fudan University reached a software custom development agreement, jointly committed to using AIGC and AINPC to promote the research and development and application of new technologies in the fields of artificial intelligence, virtual reality, and augmented reality. In August of the same year, Keying Network announced that it would invest 800 million yuan to build a digital economy R&D center to empower the big data industry and dig deep into the "new kinetic energy" of the industry. In March this year, the VR game "Mecha Party" developed by Chenni Network, a subsidiary of Kaiying, has officially landed on PlayStation North America and Steam platforms.

In addition, according to relevant sources, Kaiying Network is currently developing the first Douluo Continent IP mobile game based on AIGC and AINPC technology.

With the blessing of these new technologies, players are expected to see the lifelike Douluo Continent composed of "alive" NPCs, lifelike world scenes, diverse interaction modes and rich content in the future.

Recently, Kaiying's self-developed "Xingyi" large model has taken the lead in successfully integrating into the R&D pipeline of its products, and has successfully achieved significant efficiency enhancement for the R&D of multiple projects. For the company, with the empowerment of cutting-edge AI technology, the listed game company has achieved remarkable results in reducing costs and increasing efficiency, which will also have a positive impact on the improvement of performance.

In the future that will be reshaped by technology, what new momentum will AI bring to enterprises, industries, and capital markets?

At the Boao Forum, experts said that the game industry is an important force to promote new quality productivity. At the same time, Galaxy Securities believes that AI will continue to empower to reduce costs and increase efficiency. Industry insiders pointed out that "the golden decade of artificial intelligence has started since then, which will greatly change the entire social economy and industrial ecology and become another kind of productivity." ”

Focusing on its main business and taking the lead in AI layout, Keying Network has achieved double growth in revenue and performance, and has been widely recognized by the capital market, and has been included in the MSCI China Index and SZSE Component Index.

In 2024, Kaiying Network will start from the "new". In the new year, Keying Network already has a sound management system, rich product scheduling, and extremely leading AI layout, and it is foreseeable that 2024 will be a year for Keying Network to take off. (Huang Yifan/text)