This year, with the support of multiple factors such as breakthroughs in AI technology and the recovery of the game industry, the market's interest in the sector is rapidly increasing.
Taking game version distribution as an example, the number of domestic game versions approved this year has reached 610, which basically covers important products from leading companies and waist companies. At the same time, distribution of imported game versions has also gradually resumed. A total of 58 imported game versions have been distributed throughout the year. The batch has increased compared to the batch for the whole of 2022, and the number has also increased significantly from 44 models last year. The industry is gradually returning to a fast-paced pace of development.
In response, Guotai Junan Securities pointed out that high-quality products from key manufacturers have been approved one after another, which is expected to speed up the implementation of reserve product pipelines. Combined with Hong Kong stock, the valuations of internet game companies are still generally still at the center of history, and the accelerated recovery of game revenue from leading manufacturers is driving the sector and company valuations to recover upward.
Source: Guotai Junan Securities
At the same time, during the recent mid-term disclosure period for Hong Kong stocks, many companies showed a recovery trend in the industry, such asXindong Company (hereinafter referred to as “Xindong”) successfully ushered in a reversal in performance, turning losses into profits.
Financial reports show that in the first half of the year, Xindong achieved revenue of 1,753 billion yuan, an increase of 10.0% over the previous year; gross profit of 104 million yuan, an increase of 32.5% over the previous year;Net profit of 113 million yuan is the first time since the first half of 2021 that the company has recorded net profit for the reporting period.
Data source: Company financial report
1. TapTap advertising revenue and the launch of new games are all boosted
On the one hand, one of the main drivers of Xindong's rapid growth in performance is the increase in advertising revenue of TapTap and the impetus for the launch of two new games, “Torchlight: Infinity” and “Fire Soda”, in China.
First, TapTap, a gaming platform owned by Xindong, can be said to be one of the most popular game channel platforms currently in the market. Although in the first half of the year, under the influence of external environmental factors, the average monthly active users of the TapTap China app was 34 million, down from the previous year, but its information service revenue maintained a rapid growth trend. Revenue in the first half of the year reached 603 million yuan, an increase of 29.3% over the previous year.
It is worth noting that after many policy adjustments, TapTap China's MAU began to regain its growth momentum in June of this year, and MAU reached 39.3 million in July. In addition to the 2023TapTap game launch conference held by Xindong in July, the latest news on 42 cross-vendor game products was released, including 7 exclusive TapTap games and a self-developed game creation tool “Starfire Editor” with built-in AIGC.This may further enrich the platform's content ecosystem, expand TapTap's market influence and channel exposure, and drive the continuous growth of platform users, thereby boosting the company's exclusive games and TapTap advertising revenue.
Second, in terms of new games, “Torchlight: Infinity” and “Fire Soda”, which were developed by Xindong, were launched domestically in May and June of this year, respectively. The gross margin of the driving company's gaming division rose from 40.1% in the same period last year to 47.3%.
Among them, “Torchlight: Infinite” ranked in the top 3 of the game free game list for a week in a row, reaching a top 19 on the bestseller list; “Firepower Soda” ranked 1st on the iOS game free game list, and achieved 36 best-selling games, demonstrating the strong commercial value and market potential of the company's game products.
In the author's opinion,While veteran games such as “Sausage Party” and “Ragnarok M” simultaneously contributed stable revenue, with the subsequent launch of more reserve game products such as “Sword of Suzuran: For This Peaceful World”, which may continue to push the company into a harvest period where revenue and profits grow at the same time, it will continue to enhance the synergy between high-quality content and platforms.
2. Remarkable results in reducing costs and increasing efficiency, and pursuing higher growth certainty
On the other hand, it's about controlling costs.
As competition in the game industry becomes more intense, self-developed games are one of the core driving forces for the development of game manufacturers. While pursuing profits, enterprises must also actively control internal operating costs in order to maintain their advantage and continuous profitability in market competition.
In this regard,Xindong continues to pay attention to players' needs and market trends, controls costs by reducing marketing activities, optimizing game projects, and optimizing staffing, etc., and focuses resources on game products with more valuable potential.
As reflected in the data, the company's sales and marketing expenses for the first half of the year were 330 million yuan, a year-on-year decrease of 18.2%. Mainly, the company reduced TapTap's marketing activities, which reduced TapTap's revenue costs by 18.1% year-on-year.
In addition, the company is also gradually applying AIGC technology to game development and optimizing staffing to improve content production efficiency. As of June 30, the company had 828 employees engaged in game R&D, a year-on-year decrease of 209, and terminated or adjusted the R&D work for some game projects one after another. Financial reports show that the company's R&D expenditure in the first half of the year was 528 million yuan, a year-on-year decrease of 19.6%, achieving the goal of cost control.
Data source: Company financial report
In summary, Xindong's “platform+game” strategic model has been tested by the market, and the future growth context of the company is already very clear.
However, at the valuation level, the performance recovery shown by Xindong has yet to be reflected in stock prices.
The author believes that under the resonance of multiple benefits such as license distribution and AI support, the market will re-understand the nature and value of the game industry. With the continuous development of the Xindong TapTap platform and the gradual release of the value of continuously launched product reserves, we have achieved breakthroughs in new products and new markets.