The supervision of the game industry is becoming stricter, and challenges and opportunities coexist
In 2021, under the background of stricter policy supervision and strict control of the total number of editions, in the short term, the R & D and launch progress of new games will be affected, and the smaller game manufacturers will be under pressure. In the medium and long term, on the one hand, it will benefit the long-term healthy and stable development of the game industry, on the other hand, Chinese game enterprises will change the traditional product R & D, distribution and operation mode, The high-quality products, the fine operation and the game going to sea have become the necessary options for game manufacturers. Behind the rapid rise of new game forces represented by MIHA tour, Lilith, Eagle corner, paper folding and celadon is the industry reform caused by the power of product innovation. The first part of this time will focus on celadon game, one of the new forces of Hong Kong stock games.
Popular games drive the revenue and profit growth of celadon games
The compound annual growth rate of celadon game's total operating revenue from 2018 to 2020 is
253.1%, the compound annual growth rate of net profit was 104.3%, and the revenue and net profit maintained a rapid growth trend. In 2020, the substantial growth of the company's revenue is due to the increment of game operation revenue and information service revenue brought by the strongest snail launched by the company in June 2020. In the first half of 2021, the company achieved a revenue of 763 million yuan, a year-on-year increase of 761%, mainly driven by the two games "the strongest snail" and "lantern and dungeon", as well as the increase of information service revenue. In the first half of 2021, the company's net loss was 93.8 million yuan, which was mainly due to the loss of 338.4 million yuan in the fair value of convertible redeemable preferred shares. After excluding the impact of convertible redeemable preferred shares, celadon game's net profit after deduction was 294 million yuan in the first half of 2021, turning the loss into profit year-on-year.
Celadon games have strong penetration in young consumer groups
In 2020, the top five market participants in China's mobile game market hold a total market share of 72.5%, and celadon games account for 0.4%, but celadon has obvious advantages in placement and rogue like RPG segments. In 2020, celadon ranked second in the flow of placement games in China (with a market share of 16.7%), and celadon also ranked second in the flow of rogue like RPG independently developed in China (with a market share of 8.6%), and placement and rogue like RPG categories have potential development space. As of October 2021, celadon has 10.4 million celadon iron powders, about 76% of which are under the age of 30, much higher than the industry average level of 65%. Celadon game products have strong penetration among young consumer groups.
Industry rating and investment strategy
Give the industry overweight rating. Celadon plans to launch four self-developed games in 2022 and 2023 and six imported licensed games in 2022. On the whole, celadon has 10 game reserves with multiple categories, such as parkour, SLG, act, STG and act RPG. The products in reserve include time travel agency, demon plan, blade heart 2, etc. In addition, celadon plans to launch the local version of lantern and dungeons in Hong Kong, Macao and Taiwan in the second quarter of 2022 and the strongest snail in Japan. Celadon also expects to launch 9 of the 10 game reserve products in the overseas market to deeply layout the overseas market. The rich reserves at the product end will provide strong support for celadon's future performance. Looking at the new development trend of the industry from celadon games, after China's game industry entered the era of products being the king, boutique, diversification, globalization and youth have become key words, and have also become the key point for game manufacturers to explore new increments. Deeply tap the needs of young users and make innovative game products that understand young people better. Game products have a broad market space, not only from the flow performance dimension of products, but also from the original culture
Business value extension of IP. The game industry is facing a new era of game between new forces and old forces. Opportunities and challenges coexist. Benign competition is expected to promote the sustainable and healthy development of the game industry, bring more high-quality game products to the industry from the supply side, and then bring new increment to China's game industry from the dimensions of diversified categories and global market.
Key recommended stocks
It is suggested to pay attention to the heart company (2400. HK). The company pays attention to the long-term value of improving R & D capacity and user scale, and continues to increase R & D investment. On the one hand, it is conducive to driving the growth of taptap platform users with the exclusive content of self-developed games, and then feeding games and developers by the platform. On the other hand, it is conducive to accelerating the upgrading of taptap products and technologies, Both are in line with the company's long-term development strategy. We believe that the company's performance is under pressure during the R & D investment period. Although it has experienced performance pain, increasing R & D investment is the only way for the company's sustainable development. We are optimistic about the prospect of the company's coordinated development around "exclusive content + taptap global community platform". In the steady progress of the company's self-developed game products, key self-developed game products such as torch light: infinity are expected to contribute to the performance increment in 2022. The enhancement of self-developed strength is also expected to further strengthen the moat of taptap's exclusive game content and release more collaborative value between game products and taptap platform.
Baiao family interaction (2100. HK). The company has been deeply engaged in the game industry for many years. It has advantages in the sub categories of women's competition, secondary competition and pet competition. The internal company has rich game IP reserves with a long life cycle, and the external company is expected to achieve synergy with Tencent. The company has a diversified and rich portfolio of game products, which is expected to accelerate the pace of development in China and overseas markets. Obi Island mobile tour and dawn are expected to be launched in 2022. The high reputation product under research project 24 / 36 is worth looking forward to. The company has a rich portfolio of products, which provides a strong support for performance growth, We are optimistic about the company's advantages and long-term development in the three segments.
Risk statement
Increased market competition risk, industry policy supervision risk, head game revenue decline risk, new game performance does not meet the expected risk, game product delay on-line risk, sea game product performance is lower than the expected risk.
