Core views

Giants Network was one of the first established game companies to go public. The mobile game era had a high-influence IP “Journey”, launched the “Journey” mobile game series in the mobile game era, and at the same time pioneered the highly successful “Battle Ball” series in the casual category. Relying on the “Journey” and “Ball” series over the past few years, the company's profitability has remained stable without the launch of key new products. At the same time, it is devoting itself to developing new games. Three new products will be launched this year, including “The Original Journey”, “Operation Space”, and “Dragon and the End of the World”, which will continue to expand in MMO, leisure, and placement tracks. I am optimistic about the long-term performance and performance flexibility of the new products.

At the same time, the company actively embraces new technologies such as AI. According to founder Shi Yuzhu, “AI+ Gaming” is the company's future key layout direction. It will reduce costs and improve efficiency in terms of art, procedures, etc., and will also build a detailed numerical system to increase revenue. Recently, the company collaborated with Baidu to launch “Space Shark”, the mobile game image “Space Shark” created by AI in “Operation Space”. The “Operation Space” script model has been created by more than 200,000 players, and casual games such as “Battle Ball” and “Operation Space” are expected to take the lead in incorporating AIGC.

summary

1. Old products: The “Journey” + “Ball Ball” series has a stable flow and a solid foundation. “Journey” is a well-known IP for National Battle RPG online games. As of the beginning of 2020, the cumulative revenue of all products exceeded 20 billion dollars. Currently, the mobile game and mobile game versions are still in active operation. “Battle Ball” is a casual and competitive mobile game launched by the company in 2015. It has strong social attributes and high user stickiness. It is another of the company's main streaming games after “Journey”.

2. New game: “The Original Journey” returns, and I'm optimistic that the company will launch 3 new products this year: 1) “The Original Journey”: launched on March 24. Compared with previous “Journey” series mobile games, “The Original Journey” has greatly improved in terms of production team, gameplay, picture quality, and numerical system balance, which is expected to add further growth to the Journey series; 2) “Super Sus” (Super Sus) was launched in January. It is expected that “Super Sus” (Super Sus) was launched in January. On the first day, the company launched a space werewolf game with strong social attributes. The number of new registered users exceeded 1 million, referring to the similar game “Egg Boy” “Party”, user turnover grew rapidly after reaching a certain level of accumulation. At the same time, the operating cycle is expected to contribute revenue to the company's long-term stability by referring to “Battle Ball”; 3) “Dragon and the End of the World”: A two-dimensional mobile game, which has now received a version number. Its director, Liu Yifeng, has published games such as “Endless Urara” and “Immortal Road”, and has rich experience in placement game development.

3. AI: Actively embrace new technology. According to founder Shi Yuzhu, “AI+ Gaming” is the company's key layout direction in the future. It will reduce costs and improve efficiency in terms of art, procedures, etc., and also build a detailed numerical system to increase revenue. Recently, the company collaborated with Baidu “Wen Xin Yidu” to launch the mobile game image “Space Shark” created by AI in “Space Action”. In the “Operation Space” script mode, players can independently create exclusive maps, scenes, party gameplay, etc. Currently, more than 200,000 players have created their own scripts. Through generative AI, players' creations in “Space Ops” are expected to be further diversified and the creative process simplified, further improving the quality and quantity of player-created content in the game. Casual games such as “Battle Ball” and “Operation Space” are expected to take the lead in incorporating AIGC.

4. Investment suggestions: The company's old games contribute steadily to revenue and profits. The three new games launched this year will gradually contribute to increased performance. Combined with the company's active embrace of AI technology, it is expected to reduce production costs, optimize numerical systems, strengthen player operations, and improve the company's profitability in the long term. We expect the company to achieve net profit of 912 million/1,150 million/1,399 million yuan in 2022-2024, with year-on-year changes of -8.30%/26.12%/21.62% respectively. The PE corresponding to the current market capitalization is 32.6x, 25.9x, and 21.3x respectively. We are actively paying attention.