Shouzheng: around the "Journey" and "Ball Battle" two core IP fine operation. "Journey" as a domestic PC-end game TOP3 products, after more than a decade of precipitation, the PC game series accumulated more than 20 billion; the mobile terminal "end-to-end change hand" has been a success, "Journey Pocket version", "Journey 2", "Green Journey" and other mobile games series accumulated more than 5 billion. Since the launch of "Ball Battle", the peak DAU has exceeded 25 million, and the global cumulative installation volume has exceeded 500 million times.
We believe that the key competitiveness of the company's IP products is mainly reflected in:
1) Endogenous iteration with long life cycle. The core products revolve around "one flagship every three years, one big shift a year"
The idea is to ensure players' demand for IP content through annual product iterations, and to seek a major breakthrough in products through flagship upgrades every three years. According to our grass-roots statistics, "Journey 2" in nearly a year
And "Ball" updated version 8 times, 10 times, adding chicken eating, hunting and other micro-innovative games, the activity is significantly higher than similar competitions.
2) the complete construction of e-sports 's competition system. Take "Ball Battle" as an example, its competition system is divided into lower level (national participation tournament under ATP points promotion system, online open tournament, city trials, tripartite competition), upper level (BPL professional league, TTC Tatan Cup Elite Challenge) and top level (BGF year-end finals), becoming the most concerned brand of mobile leisure e-sports events in the industry, with a total attendance of more than 300 million people.
3) Cross-border integration in the field of cultural and creative life. Based on the refinement of IP elements, the company has launched online and offline multi-dimensional collaboration in the fields of fashion, literature and tourism, catering, film and television, etc., featuring Wuzhen offline Carnival, KFC time-limited 1000 stores, "Journey Movie" (expected to be launched in May this year), and so on.
Innovation: focus on "2x3" is good at the track, strong R & D drive continuous output of high-quality products. 1) in addition to the above two classic product lines, the company focuses on the three main tracks of 3DMMORPG, Pan-Quadric and Placement / UE4, and is expected to gradually enter the harvest period from 2020 to 2021. Among them, the key products are "Pascal contract" (recommended by Apple Inc at the autumn press conference globally, and launched at the top of the multinational payment list in January 2020), "Walnut Diary" (Tencent's only generation, it is expected to launch in the summer of 2020), "Xianxia World", "Journey 3" and so on. 2) maintain high R & D investment for a long time, and take the lead in self-research engine and server architecture. In 2018, the company had 1635 R & D personnel, accounting for 72.12%; R & D investment of 788 million yuan, accounting for 20.85% of income; horizontal comparison of similar companies in a high quantile level. 3) reconstruct the younger management team and open the "Dazhong Taiwan" R & D model and partner incentive system. In 2019, the company successively introduced / promoted the top executives of the post-80xample 85 and opened the first batch of partners, on the one hand, to improve the overall efficiency of the R & D mechanism from the top down, and on the other hand, from the bottom up to encourage small teams to grow and innovate themselves.
Xu Li: increase the size of mobile games to go out to sea, actively layout cloud games. In 2019, the company released "Zheng he's Voyage Plan", introducing two important overseas business executives, Wang Weizheng and Liu Yifeng, with new products such as "Pascal contract", "Basketball Plan", "Night of the full Moon", "Twelve Gods weapon", "tsutsugamushi Armor" and other international top exhibitions, such as the PAX East Game Show in the United States, E3 in the United States, and Cologne International Game Fair in Germany, to warm up the products to enter the overseas market. In 2020, the company will officially test the waters of overseas markets on a large scale. After the success of the first battle of the Pascal contract, the classic product "Mobile Journey" will be launched to the Middle East this year. At the same time, after the termination of Playtika restructuring, it will still maintain a good cooperative relationship with the company, cooperate with the company in AI research and development, global channels and other areas of long-term development, and actively explore other more suitable capital operations. In addition, the company's strategy to invest in the domestic cloud game leader Haiyu dynamic (that is, "Haimayun") 18.06% equity, some of the games have been tested on the cloud game platform.
Investment suggestion: as the representative manufacturer in the PC game era, the company sharpens its innovation. In the current era of stock competition, on the one hand, it seizes the key track to invest core resources, on the other hand, it comprehensively develops the overseas blue ocean market. We are optimistic about the company's way back to the top manufacturers. We expect the company's net profit from 2019 to 2021 to be 834 million yuan, 1.103 billion yuan and 1.482 billion yuan respectively, corresponding to the EPS of 0.41,0.54,0.73 yuan respectively.
Risk tips: changes in industry regulatory policies, the progress of new product research and development is not as expected, the promotion effect of overseas markets is not as expected, and the commercial progress of 5G cloud games is lower than expected.
