The performance of listed companies in the A-share game industry has recovered in 2023, and the overseas and mini game markets may become performance variables. Currently, the game industry is at a low valuation level. Focus on companies with product schedules or room for profit release in the future.
The Zhitong Finance App learned that Guotai Junan released a research report saying that the performance of listed companies in the A-share game industry has recovered in 2023, and that the overseas and mini game markets may become performance variables. Currently, the game industry is at a low valuation level, focusing on companies with product schedules or profit release space in the future. It is recommended to focus on two main investment lines: 1) Companies with rich new product expectations, recommend Kaiying Network (002517.SZ), and Perfect World (002624.SZ), NetEase (09999), Tencent Holdings (00700), and Bilibili (09626); 2) companies with high-quality overseas products or sufficient overseas experience, recommend 37 Entertainment (002555.SZ), benefiting from Century Huatong (002.SZ) and Shenzhou Taiyue (3002.00SZ). 603444.SH
Guotai Junan's main views are as follows:
Industry profits improved in 2023, and going overseas was an important increase in revenue
In 2023, the total revenue of A-share listed companies in the game industry reached 86.7 billion yuan, with a year-on-year increase of 3.2%, of which 15 companies had positive year-on-year growth; 24 companies had overseas business, bringing in total overseas business revenue of 29.5 billion yuan, an increase of 12.2%, which was higher than the overall growth rate. The total revenue ratio also increased further from 31.3% in 2022 to 34.1%. Among them, Century Huatong, Shenzhou Taiyue, Kunlun Wanwei, and Hikawa Networks increased significantly; the overall profit of the industry improved. 9 companies in the industry lost money this year. Losses were reversed, and 2 new companies were added to turn losses. A total of 5 companies lost money in 2023. Compared with 2022, most of the companies with the highest growth rate increased by more than 20% year on year.
2024Q1: Increased marketing investment, outstanding performance of some companies
On the profit side, companies with good performance in overseas markets and new products showed strong growth in 24Q1. For example, Shenzhou Taiyue and Century Huatong had outstanding overseas business performance, and Giant Network and Kaiying Network contributed to high-quality new products in 24Q1, so the profits of the four companies increased significantly; in 2024Q1, the total sales expenses of A-share listed companies in the game industry reached 7.756 billion yuan, an increase of 46.5% over the previous year, and the fee rate also increased to 35.3%. It was the highest quarter in the past 5 years, which also constituted an important compression factor for 24Q1 performance. Product profits are expected to be released .
The supply of domestic versions is stable, and attention is paid to the overseas market and mini game market pattern
Since December 2023, domestic edition distribution has accelerated markedly. Domestic editions have been distributed at around 100 per month, and imported versions are distributed once every two months; in terms of going overseas, Diandian Interactive (Century Huatong) has a stable position in the top three, 37, and Shenzhou Taiyue; in terms of WeChat games, the number of users continues to rise. In terms of WeChat mini games, the MAU of WeChat games exceeded 750 million, an increase of more than 20% over the previous year. However, the current industry pattern is still scattered, and small and medium-sized manufacturers still have opportunities. 37 Entertainment, Tencent, and Kaiying Network Companies such as Chuan Network and Mingchen Health rank among many products Top 100 WeChat Mini Program Game Bestsellers.
Risk warning: Industry demand recovery falls short of expectations, overseas competition intensifies, and mini game market launch costs rise.