According to a research report released by Southwest Securities, maintaining the “buy” rating of Tencent Holdings (00700), the estimated non-IFRS net profit for 2023-2025 is 153.43 billion yuan, 177.39 billion yuan, and 206.43 billion yuan, respectively. The corresponding EPS is 16.13 yuan, 18.65 yuan, and 21.71 yuan respectively. On December 15, the genuine family party game “Yuanmeng Star” developed by Tencent Tianmei Studio was launched. On the first day of launch, “Yuanmeng Star” reached the top 1 and top 3 best sellers on the iOS free list. Various businesses are developing at an accelerated pace. “Yuanmeng Star” has brought in additional game business, and it is expected that its order volume will continue to grow in 2024.
The main views of Southwest Securities are as follows:
The space for party games is vast, and social networking helps development.
Since 2020, high-quality party games such as “Animal Party”, “Sugar Pea Man”, “Defeated by Humans”, and “Egg Party” have been popular with gamers. Party games have continued to gain new players with a low entry threshold and social gameplay, and have plenty of room for growth. Social networking is an important part of attracting players for party games. Tencent has strong social genes. In the third quarter of 2023, WeChat and QQMAU reached 1,336 billion and 559 million respectively. The huge user base of WeChat and QQ helped “Yuanmeng Star” build a social ecosystem. Tencent Video and QQ Music provide audio and video support for game social networking.
The gameplay is rich, and the content ecosystem enhances stickiness.
“Yuanmeng Star” has a rich gameplay layout to meet the needs of different players. The classic mode is racing and breaking through, and the entertainment mode has various gameplay such as Super Smash, Bio-Chase, Master of Weapons, Speed Racing, and Who is a Werewolf. The “Star World” UGC creation module provides creators with a feature-rich map editor and modular components. Players can build new scenarios based on existing components and give them various ways to play. At the same time, a creator incentive program has been launched to encourage players to use their creativity to produce high-quality UGC content. UGC creation provides players with more freedom and participation, continuously expands players' creativity, and builds a “Yuanmeng Star” content ecosystem through continuous production of high-quality content to enhance user stickiness.
Linkage with popular IPs to boost marketing promotion.
“Yuan Meng Star” has obtained a double license for “Sugar Bean Man” and “Humans Defeated”, and is linked to popular IPs in various entertainment industries such as animation, movies, and games. Relying on the huge fan base and influence of well-known IPs such as “Wang Zhe Rongyao,” “Kung Fu Panda,” and “Crayon Shin-chan,” the “Crayon Shin-chan,” etc., it has further expanded its audience. In terms of marketing and promotion, “Yuan Dream Star” is actively promoted on Tencent's platforms and platforms such as Douyin, Weibo, Station B, and Xiaohongshu, and cooperates with Aofei Entertainment to develop derivatives such as badges for related characters. At the same time, the first phase plans a special investment of 1.4 billion dollars for special development such as the construction of a national e-sports competition system, incentives for content ecosystem creators, and incentives for UGC map creators. Long-term investment will not be capped, which is expected to enrich the game ecosystem and continue to expand its influence.
Risk warning: Risks such as fierce market competition and failure to commercialize as expected.