\u3000\u3000 G-Bits Network Technology(Xiamen)Co.Ltd(603444) (603444)
[Abstract]
G-Bits Network Technology(Xiamen)Co.Ltd(603444) founded in 2004, it is a research and transportation provider of China’s top-quality games. The “ask” end mobile game has realized ultra long-term operation. In recent years, the strongest snail (Hong Kong, Macao and Taiwan version), Yinian Xiaoyao and Moore Manor mobile game have become popular on the track. We believe that G-Bits Network Technology(Xiamen)Co.Ltd(603444) with the differentiated category advantages formed by the joint construction of research and transportation, it has established a high moat for a long time in the reform cycle of the game industry and achieved steady and sustained growth in performance.
I. short term: the stock space is stable and resilient, and the incremental space elasticity is large
1) the stock space is stable and resilient: the long-term operation of “ask” & “Yinian Xiaoyao” and the ultra long-term operation of “ask” end-to-end mobile games, and the three new versions contribute to the flow peak value stably. In recent years, under the background of increasingly tight policy supervision of the game industry and accelerated industrial iterative changes, the long-term operation products represented by “ask” have provided strong stability for the company’s basic performance. The end game of “ask” was launched in 2006. It is an MMORPG game independently developed by the company. It attracts a large number of core players with its good quality, and the highest number of online players is nearly one million at the same time. The content of the end game continues to be rich, and three versions of annual service, annual service and mid year service are launched every year to keep players fresh. “Ask for a hand tour” was launched in 2016. It inherits the end tour IP and core playing methods and optimizes the hand tour. It regularly launches three versions of new year’s clothes, anniversary clothes and national day clothes every year. In combination with the centralized purchase of the new version & brand promotion, it realizes the group return of users at a fixed time point and contributes to the annual flow peak. As of 2021h1, “ask mobile game” has ranked 19th on average in the best-selling list of IOS games, with a cumulative number of registered users of more than 48 million.
The long-term operation methodology of “Yinian Xiaoyao” has been successfully practiced again to consolidate the base of performance. “Yinian Xiaoyao” is a mobile game for Guofeng Xiuxian developed by the company. After the game was launched in February 2021, it performed well and ranked among the top 15 in the best-selling list of IOS games in the first month. So far, the monthly flow performance of the product has been stable. The centralized purchase of the anniversary version at the beginning of 2022 has entered the top 10 of IOS best seller list. In the future, Yinian Xiaoyao is expected to become another long-term operation product of the company after the end-to-end mobile game of “ask” and consolidate the base of performance. For the success of Yinian Xiaoyao, we believe that it is mainly due to the company’s adoption of the promotion idea of “integration of quality and efficiency” in the distribution: 1. On the launch of purchase volume: warm-up period + initial stage of launch + centralized purchase volume of new version, so as to quickly improve the exposure; Optimize the buying materials according to the product tonality and target audience, and take “relaxed leisure” as the selling point to enhance the suction capacity. 2 – brand marketing: actively shape the “one thought” IP image and break through the stereotype of game players on the original fairy games. 3- game player: game player tiktok, jitter, WeChat official account and other players to operate, encourage players to create UGC, help increase the amount of natural.
2) incremental new products have potential flexibility: there are many reserves of agent products, abundant version numbers and great potential
According to the company’s announcement and public news reports, at present, many products to be launched have obtained version numbers. Specific products include 2droguelike “dawn elite”, magic theme roguelike “ancient treasures”, antique palace theme RPG “flowers fall in Chang’an”, card placement game “journey of strange fate” and high score simulation business sequel “sailing Diary 2”. Among them, the test of paid file deletion has been started recently for “journey of strange fate” and “Diary 2”.
“Dawn elite”: a 2droguelike shooting game integrating the perspective of bending and the elements of action, design and cultivation. In the game, players will lead the dawn team to fight aliens in various battlefields. In the game, there are rich weapons with a sense of future science and technology, props with different styles and realistic eschatological scenes, which bring players an immersive adventure exploration experience. At present, the game has obtained the version number;
“Flowers fall in Chang’an”: the theme of ancient palace develops RPG mobile tour, adopts 2D realistic painting style, and focuses on the story of female masters from civilians to prime minister. Players can try a variety of costumes, interact with multiple characters and establish fetters. This game is G-Bits Network Technology(Xiamen)Co.Ltd(603444) a preliminary attempt of women to the game. The rich community and user operation experience accumulated by the company for many years helps the team grasp the mind of female players and realize the increase of player stickiness and the fermentation of word-of-mouth. At present, the game has obtained the version number.
II. Long term: core strengths gather to form a tower, and the operation / selection / self research ability promotes continuous growth
1) distribution: strong selection ability, superimposed with thunder game operation experience, with great potential for explosion
Establish a distribution system of “integration of quality and efficiency”, pay attention to users and communities, and realize ultra long-term operation. G-Bits Network Technology(Xiamen)Co.Ltd(603444) thunder game, its independent operation platform, has successfully released popular games for many times. The success of products such as the strongest snail (Hong Kong, Macao and Taiwan version), Moore Manor and Yinian Xiaoyao has verified the sustainability of the company’s agent distribution ability. This structured ability is mainly reflected in three points: 1. Select the distribution strategy according to the product characteristics: for strong play games such as placement, roguelike and simulated operation, adopt the heavy buying promotion idea of “integration of quality and efficiency”; For games with strong social attributes, players’ self communication is the main way. 2 – pay attention to community and user operation: continuously add game content to long-term products to improve the freshness of players; Actively open up player community platforms (Thunder village, liver krypton APP); 3 – division of research and operation and establishment of a complete distribution system: thunder game is independent of the company’s self-development system and has a complete organizational structure, covering front office departments such as product introduction, distribution, marketing and marketing, as well as middle office departments of operation, so as to improve the efficiency of all links.
Thunder is expected to obtain more high-quality game agents in the future. 1 – the game concept has been recognized by the industry and formed influence: Recently, the company announced to act as an agent for the “Cairo game” series of Japanese boutique games. The developers explained in the official channel that they attach importance to the game concept of “giving players a differentiated and beautiful experience”, which reflects the company’s great influence in the industry. 2 – the company has accumulated the advantages and successful experience of differentiated categories: the strongest snail, Moore Manor, one mind carefree, don’t think about maze, etc. have been successful on the thunder platform. The company has accumulated rich experience in placing on hook, roguelike, simulated operation and other sub categories, making it easier to tap games with explosive potential. At the same time, rich distribution experience will also better help developers with product modification and optimization. From this point of view, thunder platform is not only the exploration of high-quality products, but also can cooperate with developers to jointly create popular models.
2) self research: R & D mechanism / team / concept innovation, reserve the self-developed products of MMORPG + SLG + on hook
Pay attention to player experience in R & D mechanism / team / concept innovation. 1- R & D mechanism: encourage internal innovation, adopt the research and development mechanism of “bottom up” and “small step run”: the company encourages independent research and development of teams, and continuously tap potential talents in the industry. Recently, Kwai Chi Fung fund is established jointly with the fast hands to further explore talents in the game industry and high-quality project teams. Before going online, we will conduct centralized testing and tuning, and carry out rapid verification iteration. “Yinian Xiaoyao” is a typical example of the company’s “small step and fast run” mode. 2 – R & D team: large R & D investment and high proportion of R & D personnel: as of 2021h1, the company has 476 R & D personnel, accounting for 58% of the total number of employees. The proportion of R & D personnel has been expanding in recent years; The bonus incentive of R & D personnel is higher than the industry average, and the project bonus is accrued on a monthly basis according to the project flow and other conditions. 3 – R & D concept: focus on player experience and pay attention to sociality and balance.
Reserve MMORPG + SLG + self-developed products of the three major tracks, which are expected to achieve a leap forward breakthrough after going online.
Since 2020, the company has determined to focus on three tracks that are easy for long-term operation for the first time to accumulate differentiation advantages. MMORPG track has a long life cycle, high payment rate and high growth potential; SLG track helps to broaden the sea market, with high ARPU value and easy combination with other playing methods; There are many popular models in the on hook track, and a variety of playing methods are integrated. The competition in China is small and the growth rate is fast. The company has made public that its products under research cover three major tracks: 1) mobile game of phantom Ranger: Netdragon game provides IP, G-Bits Network Technology(Xiamen)Co.Ltd(603444) self-developed end transfer MMORPG game, which is another MMORPG game independently developed by the company after asking for IP. It is at an early stage. 2) Self developed SLG mobile game: the company’s first SLG masterpiece. At present, multiple play versions have been developed at the same time, which will be tested and optimized later. 3) Code M66: leisure placement simulation operation mobile game.
III. financial analysis: strong profitability, high dividend payout and attention to shareholder return
High scores, high dividends and attention to shareholder returns. G-Bits Network Technology(Xiamen)Co.Ltd(603444) has continued to pay dividends since its listing in 2017, and is ahead of its peers in the absolute value, ratio and rate of dividends. From 2017 to 2020, the company’s total annual cumulative cash dividends were RMB 190 / 7.2 / 3.6 / 860 million respectively, and the cash dividend ratio was 30.7% / 99.4% / 44.4% / 82.4% respectively, which was significantly higher than that of comparable companies in the same industry. The corresponding dividend yield is 1.4% / 6.8% / 1.7% / 2.8% respectively. Under the guarantee of stable profitability, the company’s high dividend is expected to continue.
Profitability is at the forefront of the industry. 1) The gross profit margin in the first three quarters of 2018-2021 was 92.2% / 90.5% / 80.6% / 82.8% respectively, which was at a high level in the industry; 2) Net profit attributable to parent company and net profit deducted from non parent company increased steadily. In the first three quarters of 2018-2021, the company’s net profit attributable to parent company was 7.23/8.09/10.46/1.206 billion yuan, with a year-on-year increase of 18.6% / 11.9% / 29.3% / 51.7%.
Sufficient cash, healthy asset structure and smooth deferred income. The company’s asset liability ratio remains at about 22%. The liabilities mainly come from the unamortized consumable props, recharge and permanent props generated after the launch of the new game, so as to smooth the income to a certain extent and reduce the fluctuation of the company’s income caused by the launch rhythm of the new game; The current ratio and cash ratio are high, and the net cash flow from operating activities remains at a medium position and grows steadily compared with peers. Sufficient cash flow is an important embodiment of the company’s realization and an important guarantee for subsequent R & D operations.
IV. investment suggestions
In the short term, 1) the company has strong resilience in industrial / policy changes: the company’s long-term operation products “ask” end-to-end mobile games and “one mind carefree” have a stable flow and a large contribution to revenue; 2) The company’s new games are expected to provide greater performance flexibility: there are many agent products to be launched, the version number reserve is rich, and the company’s agent selection ability is superimposed, which is expected to tap new and popular funds. In the long run, the company’s operation / product selection / self-research capabilities form a tower of structured capabilities, and the self-research track is steadily arranged, which can achieve long-term stable growth. We expect the company’s revenue in the 21st-23rd years to be 4.69/53.6/6.34 billion yuan respectively, with a year-on-year increase of 70.9% / 14.2% / 18.4% billion yuan; The net profit attributable to the parent company was RMB 1.62/18.7/2.28 billion; The corresponding PE is 16x / 14x / 12x respectively.
Risk tips
The performance of existing core products is less than expected; Game industry policy risk; The performance of products to be launched is lower than expected; The online progress of self-developed products is less than expected.
