Matters:
The General Administration of press and publication disclosed the approval of the version number of the latest batch of 45 games in the evening of April 11, marking the official restart of the version number after the distribution of the version was suspended in August 21.
Guoxin media’s view: 1) affected by multiple factors such as the suspension of game version number and the supervision of the Internet industry, the game sector has continued to adjust since the middle of 21 years. Under the background that the industry still maintains a certain growth rate, the valuation of the sector has continued to decline. The head companies such as Wuhu 37 Interactive Entertainment Network Technology Group Co.Ltd(002555) have approached the valuation level at the end of 18, which is significantly underestimated as a whole; 2) We continue to be optimistic about investment opportunities in the game sector. In the short term, the restart of the edition is expected to reduce policy uncertainty and boost market confidence. In the medium term, the restart of edition number will help release demand and improve the performance growth of the industry and listed companies. In the long run, the game goes to sea to further improve the growth ceiling of the head company, and yuanuniverse is expected to reshape the product form and Industry Valuation System; 3) Target recommendation: in combination with product portfolio and operation mode, A-Shares mainly recommend Wuhu 37 Interactive Entertainment Network Technology Group Co.Ltd(002555) , G-Bits Network Technology(Xiamen)Co.Ltd(603444) , Shanghai Yaoji Technology Co.Ltd(002605) , and pay attention to Perfect World Co.Ltd(002624) , Zhejiang Century Huatong Group Co.Ltd(002602) , Kingnet Network Co.Ltd(002517) , etc. Hong Kong stocks recommend heart company, BiliBili, and pay attention to the targets such as China Mobile Games and ZuLong entertainment; 4) Risk tip: the risk of industrial regulatory policies leads to the risk of product online operation, the risk that the flow of game products is lower than expected, the collective risk of goodwill and asset loss of listed companies, etc.
Comments:
The game sector is at the bottom of historical valuation
After the suspension of the release of game titles in 2018, the release of Chinese game titles was suspended again in August 2021, resulting in a relatively pessimistic market expectation for the development of the industry; At the same time, affected by the regulatory policy adjustment of the Internet industry and the market environment, the game sector has continued to perform poorly in the past year; In terms of valuation, the current valuation of Shenwan game index ttm-pe is about 22x, which is equivalent to the valuation level at the end of the last round of game edition suspension at the end of 2018, reflecting extremely pessimistic market expectations.
The performance table of listed companies is good
The fundamentals of game performance are excellent. The growth rate of revenue and net profit of game sector 21q1 continued to maintain an upward trend, and Q3 achieved an operating revenue of 19.4 billion yuan, a year-on-year increase of 10%, reversing the continuous downward trend since Q1 in 2020; 21q3 achieved a net profit attributable to the parent company of 4.5 billion yuan, with a year-on-year increase of 14% (Q2 fell 14% year-on-year), reversing the trend of continuous year-on-year decline since Q4 in 20 years.
Restarting the game version number will help release the needs of Chinese users
The growth rate of Chinese users is slowing down, and supply has become the main driving force released on the demand side. The restart of version number will help launch new products and drive the performance growth of the industry and listed companies. In 2021, the actual sales revenue of China’s game market was 296513 billion yuan, a year-on-year increase of 6.4%; The number of game users reached 666 million, with a year-on-year increase of 0.22%, and the demographic dividend peaked day by day; In the medium and long term, the characteristics of supply creating demand are remarkable; The restart of version number will help the launch of new game products, so as to stimulate the release of user demand and drive the performance of the industry and listed companies upward
The game goes to sea to further open the growth ceiling
Chinese games have broad potential to go to sea and have become an important driving force for the growth of the industry. In 2020, the scale of Chinese mobile games going to Sea reached 15.45 billion, with a year-on-year growth rate of 33%. From 2018 to 2020, there are three, three and five mobile games with an annual revenue of more than $1 billion. The increase in the number of games with an annual revenue of more than $1 billion also shows that mobile games still have great growth space and development potential in the world. In 2021, the actual sales revenue of China’s independently developed games in overseas markets reached US $18.013 billion, an increase of US $2.563 billion over 2020, a year-on-year increase of 16.59%.
Long term metauniverse is expected to reshape the product form and industry valuation system
Metauniverse will bring more immersive, richer and diversified needs and release more content needs; The natural interaction of game content and community atmosphere are expected to become the starting point of “meta universe” in the new era; From products to platforms, the attributes of the game itself are expected to change dramatically; The game industry ushers in not only the release of demand, but also the great changes in ecology, operation and capital market valuation system.
In addition to roblox, blockchain games based on blockchain and Web 3.0 concept are also developing rapidly. Take axie infinity as an example. Its running water exceeded the glory of the king in August, and its cumulative revenue exceeded US $1 billion in 2021. Mir 4, which has joined blockchain technology and tokens, has been online for only two months, and the number of simultaneous online players in the world has exceeded 1 million.
In terms of valuation, compared with traditional game companies, roblox has separated from the valuation system of traditional game companies; PS is significantly higher than the industry average; The net profit is still at a loss and cannot be directly compared; Compared with Facebook, Tencent and BiliBili, PS and PE are still significantly higher than the above social platforms. The market value of single user (total market value / Mau, Tencent is the number of wechat + QQ users) is equivalent to Facebook, lower than Tencent but significantly higher than BiliBili; From the perspective of the valuation system, the capital market’s valuation of roblox has deviated from the positioning of the game company, but compared it with the Internet platform, giving a significant valuation premium to the prospect of the meta universe.
Investment view: grasp the opportunity at the bottom of the sector and pay attention to the possibility of double clicking upward
We continue to be optimistic about investment opportunities in the game sector. In the short term, the restart of the edition is expected to reduce policy uncertainty and boost market confidence. In the medium term, the restart of edition number will help release demand and improve the performance growth of the industry and listed companies. In the long run, the game goes to sea to further improve the growth ceiling of the head company, and yuanuniverse is expected to reshape the product form and Industry Valuation System; Target recommendation: in combination with product portfolio and operation mode, A-Shares mainly recommend Wuhu 37 Interactive Entertainment Network Technology Group Co.Ltd(002555) , G-Bits Network Technology(Xiamen)Co.Ltd(603444) , Shanghai Yaoji Technology Co.Ltd(002605) , and pay attention to Perfect World Co.Ltd(002624) , Zhejiang Century Huatong Group Co.Ltd(002602) , Kingnet Network Co.Ltd(002517) , etc. Hong Kong stocks recommend heart company, BiliBili, and pay attention to the targets such as China Mobile Games and ZuLong entertainment.
Risk tips:
Industry regulatory policy risks lead to risks such as product online operation, lower than expected risk of game product flow, risk of accrual of goodwill and asset loss of listed companies, etc.
