Mingchen Health Co.Ltd(002919) (002919)
Main points:
Daily chemical national enterprises explore new increment of game business
The company has been deeply engaged in the daily chemical industry for 27 years and has launched high-profile brands such as “tihuazhixiu”. In recent years, with the prominent head effect and intensified competition in China’s daily chemical industry, the company’s long-term growth is facing a bottleneck. Therefore, since 2020, the company has actively arranged the game business and explored new business increment through extensive M & A of high-quality game assets. At present, the company has completed the acquisition of game developers Hainan huaduo and Hangzhou Leiyan, plans to acquire Kashgar arcane, and set up a game distribution subsidiary Hainan xingxuan spacetime. In 2021h1, the revenue contributed by the game business accounted for 35% of the company’s total revenue and the net profit attributable to the parent company accounted for 88%, which has become an important driving force for the company’s performance growth.
The boom of mobile game industry is high, and opportunities for small and medium-sized R & D providers still exist
China’s mobile game market has a high scene tolerance and is expected to continue to grow driven by the improvement of China’s ARPU value and the sea going of games. In addition, the opportunities of segmenting categories brought by intergenerational replacement of consumers and the improvement of industry competition pattern driven by channel reform also bring structural opportunities to small and medium-sized game developers. Therefore, through the acquisition of high-quality mobile game developers and the layout of the game business, the company is expected to benefit from the overall high landscape and structural opportunities of the mobile game industry and explore new drivers of business growth.
Looking at the game product line in the short term: extensive M & A of high-quality game assets and the launch of a variety of new games. In terms of game research and development, the company completed the acquisition of game developers Hainan huaduo and Hangzhou Leiyan in August 2020. Its games in operation include two long-term products with a monthly flow peak of more than 100 million, including MMORPG mobile game “King’s country” and placement SLG mobile game “Bailong overlord”; In November 2021, the company plans to acquire another game developer kashaoshu. In terms of game distribution, the company established a subsidiary Hainan xingxuan spacetime in September 2021 to focus on game distribution business. In the future, with new tours such as code CQ, my battle alliance and zhenhun Street: born to be the king developed by Hainan huaduo, Hangzhou Leiyan and Kashgar Olympic technology, gradually launched from 2021 to 2022, the company is expected to usher in a new year of products.
In the long run, the strategic transformation of game business: continue to move forward to the spontaneous integration mode of younger category R & D and self-research
In terms of long-term strategy, the company has laid out three game categories: MMORPG, SLG and two-dimensional game. It is expected to reach a new generation of game users by acquiring Kashgar arcane and continuously launching differentiated two-dimensional game products on the basis of deep cultivation of MMORPG and other advantageous categories. At the same time, through the establishment of the subsidiary Hainan xingxuan space-time layout game distribution business, the company is expected to contribute to the performance increment and form a self-developed and spontaneous synergy with the game R & D subsidiaries Hainan huaduo, Hangzhou Leiyan and Kashi Aoshu, so as to further enhance the comprehensive strength of the company’s game business and open up long-term growth space.
Investment advice
We believe that in the medium term, based on the steady development of traditional daily chemical business, the company actively explores the game business through cross-border mergers and acquisitions of high-quality game companies, and is expected to usher in a new year of game products in 2022. In the long run, the company has three major game categories: MMORPG, SLG and two-dimensional game. It is expected to reach the new generation of game users by acquiring Kashgar arcane and launching differentiated two-dimensional game products on the basis of deep cultivation of MMORPG and other advantageous categories; At the same time, through the establishment of a subsidiary, Hainan xingxuan space-time layout game distribution business, the company is expected to form a spontaneous synergy of game self-development and further open up growth space. We estimate that the company’s operating revenue from 2021 to 2023 will be RMB 760 / 1870 / 2264 million respectively, with a year-on-year increase of 11.7% / 146.0% / 21.0%; The net profit attributable to the parent company was 139 / 517 / 592 million yuan respectively, with a year-on-year increase of 35.9% / 272.4% / 14.5%. The current market value of the company is 5 billion yuan. We give the company 16xpe in 2022, with a corresponding market value of 11.3 billion yuan. For the first time, give a “buy” rating.
Risk statement
1) The risk of slow growth of mobile game industry;
2) The risk of tightening the game version number policy;
3) The risk that the company’s business integration is less than expected;
4) The launch of the company’s new game is less than expected.
