\u3000\u3000 Wuhu 37 Interactive Entertainment Network Technology Group Co.Ltd(002555) (002555)
Core view
The IP matrix of Douluo continent originated from the fantasy novel through fantasy created by the three young scholars of the Tang family. The novel has been updated for 10 years and the successful IP diversified development has given it higher heat and commercial value than similar IP. In the “top 50 list of cultural industry IP vitality” selected by China economic information service, “Douluo mainland” IP ranks first. As of 2021, the Douluo mainland series has been published in seven consecutive novels, covering a span of 10 years. Douluo mainland was launched in December 2008, with a readership of about 117 million. If the core audience is 8-22 years old, the penetration rate of the novel in the group born from 1986 to 2013 is 22%. The first audience of this group – after 85, has exceeded 35 years old, and has a strong ability to pay. “Douluo mainland” IP has derived animation, animation, TV series, games and other forms. As of January 21, 2022, the animation of “Douluo mainland” has been broadcast 37.02 billion times, and the TV series of “Douluo mainland” has been broadcast 5.72 billion times. The successful breaking of the circle of Douluo mainland animation and TV series continues to inject vitality into IP. According to Baidu Index, the “Douluo mainland” search index showed an upward trend in the first month of winter and summer vacation from 2018 to 2021, highlighting the continuous influence of IP on younger groups (aged 6-18), which has great potential to pay in the future.
Wuhu 37 Interactive Entertainment Network Technology Group Co.Ltd(002555) is in a leading position in the field of mobile games adapted from Douluo mainland IP, and the market share of IOS is 88%. Among the 10 Douluo mainland IP adapted Mobile Games launched in 2017-2021, only 4 have entered the top 10 of IOS best seller list, of which 3 are issued by Wuhu 37 Interactive Entertainment Network Technology Group Co.Ltd(002555) and 2 are self-developed products. In December 2019, Wuhu 37 Interactive Entertainment Network Technology Group Co.Ltd(002555) announced to sign a contract with the starting point Chinese network of Yuewen group. In the next 10 years, the two sides will jointly create five mobile games of Douluo mainland IP. On July 22, 2021, the card mobile game “Douluo mainland: duel between soul masters” was publicly tested by Wuhu 37 Interactive Entertainment Network Technology Group Co.Ltd(002555) for two years and invested 100 million yuan in research and development. It has the dual authorization of novels and animation of Douluo mainland. The monthly flow of the game exceeded 700 million yuan in 2021q3. In 2021, it ranked the top 4 in IOS best-selling list and the top 1 in free list, ranking 11th on average. As a mobile game created by a sub era 3D engine, “Douluo mainland: soul master duel” deeply restores the animation in terms of character image, plot and scene, which fully verifies the improvement of Panax notoginseng’s R & D strength, and its publicity mode of integrating quality and efficiency also highlights the company’s innovation in marketing play. In terms of cultivation system, the game is a multi role numerical cultivation mode. The rich cultivation lines and high-frequency updates of up to 8 dimensions for each role enable players to continuously obtain a sense of achievement. In terms of playing methods, the game playing methods cover PvP and PVE, individuals and teams. There are not only the soul master duel that can let big r players show their skills, but also the national duel that can let civilian players show their strategies, so as to meet the needs of all kinds of players, build a “pyramid” player structure and help the long-term operation of the game. In addition to the highlights, the role balance adjustment was slightly neglected in the early stage of the game launch. At the same time, the daily activities took up a long time and the krypton gold experience of small R players needs to be improved. According to sensortower, “Douluo mainland: duel between soul masters” is the product with the highest IOS end net water in the 2021 Douluo mainland IP adapted mobile game. The annual IOS end net water is 188 million US dollars (about 1.2 billion yuan), and Douluo mainland: wusoul awakening ranks second with 91.56 million US dollars (about 590 million yuan). According to our statistics, from the perspective of IOS end net flow, Wuhu 37 Interactive Entertainment Network Technology Group Co.Ltd(002555) accounted for 88% of the market share among the publishers of Douluo mainland’s IP adapted mobile games in 2021, leading the whole industry.
In 2020, the scale of China’s IP adaptation market will exceed 120 billion yuan, and the scale of card game market will exceed 19 billion yuan in 2021. The head products of card category have both explosive power and long life cycle; Generation Z users are willing to pay for “appearance value”, and the playing method of cards and other categories has gradually become standard. From 2017 to 2020, the scale of China’s IP adapted mobile game market increased year by year, accounting for a large proportion of the total revenue of the mobile game market, and its market scale is expected to maintain the expansion trend in the future. In 2021, the scale of China’s card and card mobile game market was 19.396 billion yuan, yoy + 19%, and the proportion of revenue in the head mobile game category continued to increase. The subdivided integrated card game user group generation Z (under the age of 19) accounts for a relatively high proportion, and may become the mainstream playing method of card hand games in the future. The integrated playing card hand tour Yin Yang division is a typical example of a long life cycle. It has been operating for more than 5 years. In 2021, it ranked the highest among the top 2 IOS best sellers, ranking 24th on average. Harry Potter: Magic awakening, launched in September 2021, hit a new high in card hand travel. In the first month, it is estimated that the water flow will exceed 1.1 billion yuan, raising the water ceiling of card categories.
Profit forecast and investment rating: we estimate that the company’s revenue from 2021 to 2023 will be RMB 16.655/199.01/22.342 billion, the net profit attributable to the parent company will be RMB 2.764/32.96/3.929 billion, the corresponding EPS will be RMB 1.25/1.49/1.77, and the PE will be 22 / 18 / 16x. The company’s self-developed product Douluo continent: soul master duel, which has the highest commercialization ability in the industry and excellent market performance, is the symbolic achievement of the company’s development strategy of “high-quality, diversified and globalized”. In the wave of globalization of domestic mobile games, the company’s overseas business is expected to continue to become a performance growth point and help the company steadily move towards the ranks of global game manufacturers. To sum up, we maintain the “buy” rating of Wuhu 37 Interactive Entertainment Network Technology Group Co.Ltd(002555) .
Risk tips: stricter policy supervision, intensified industry competition, the performance of recommended companies does not meet expectations, the market performance of key products is less than expected, the risk of player preference change, the change of new technology is less than expected, the market style switching, the decline of Industry Valuation center, etc.
