The Zhitong Finance App learned that Sino-Thai International released a research report saying that it raised the IGG (00799) rating to “increase holdings” and adjusted profit forecasts. Revenue in 2023/24 is expected to increase 14.2%/11.4% year-on-year to HK$52.4/5.84 billion, or reverse losses in 2024 and raise the target price to HK$5. The company's core games are steady. “Kingdom Era” has a MAU of 11 million people, with an average monthly turnover of about HK$330 million. The old games have stabilized. At the same time, the new game “Doomsday: Last Follows” is gaining prominence and has great potential for growth; the new strategy game “Viking Rise” was well received after being launched at the end of '22, and was promoted in April 23, showing strong absorption capacity in the US, Japan, and South Korea.

The main views of China-Thailand International are as follows:

Core games are still stable, and old games have entered a period of stability

The MAU of the core game “Kingdom Age”, which accounted for about 80% of total revenue in '22, remained at 11 million, with an average monthly turnover of about HK$330 million. It is expected that, thanks to the company's purchasing strategy and strong long-term operation capabilities, the flow will remain stable. The female dress-up game “Time Princess”, which went live in May 2020, maintained a MAU of 1 million, with an average turnover of about HK$18 million in '22. After the role-playing game “Mythical Heroes”, which was officially launched in September 21, hit the Japanese and Korean markets in '22, it benefited from localized operation and was hugely popular. Revenue increased dramatically. It surpassed “Time Princess” in 2H22 to become the company's second largest source of revenue. The above two games have entered a stable period one after another. Coupled with the company's promotion focus on new games, it is expected that sales will naturally decline due to the product cycle.

New games are coming to the forefront

“Doomsday: Last Stand”, which has a survival theme, tower defense and strategy gameplay, increased investment in promotion in March of this year, and achieved significant results in April. According to Sensor Tower data, the number of downloads of the game surged 414% month-on-month to 6.7 million times in March, rising to 2nd place in the March mobile game list, helping April revenue increase 65% month-on-month, ranking 14th in China's mobile game overseas revenue growth list, reflecting that the product has great potential for growth. The company will adjust its launch strategy. It is expected that with its strong operating capacity, it can support the monthly turnover of products to the level of 100 billion US dollars. The new strategic game “Viking Rise” was well received after being launched in late '22. It was promoted in April '23, and showed strong absorption ability in the US, Japan, and South Korea. According to Sensor Tower data, “Viking Rise”'s revenue ranked 18th in China's mobile game overseas revenue growth list in April, and nearly doubled month-on-month in May, becoming the company's second-highest grossing mobile game product, showing great potential. Currently, the product has been launched for a short time, so it is recommended to pay active attention.

Cost reduction and efficiency will be reflected

The company has been integrating and optimizing resources in '22 and exploring the use of artificial intelligence generated content (AIGC) technology to reduce costs and increase efficiency. Expected results can be seen this year. Considering that “Doomsday: Last Stand” and “Viking Rise” are still in the early stages of promotion, and that the product's potential to be displayed may support further promotion, it is expected that the company will still record losses on 1H23 and gradually improve in 2H23.

Risk warning:(1) Industry regulatory risks; (2) New game turnover performance falls short of expectations; (3) Market competition intensifies; (4) R&D expansion results fall short of expectations.