Backed by China Telecom, Maobai Holdings naturally enjoys operator traffic dividends. At the same time, it also has the characteristics of Internet entertainment. It is expected that it will completely transform into an Internet entertainment platform in the 5G wave, achieving a gorgeous transformation and Phoenix Nirvana. The company implemented China Telecom's CICT strategy, with Tianyi Cloud Gaming as the main breakthrough, and Tianyi Ultra HD and Tianyi VR as support for the content side. It is expected that Tianyi Cloud Gaming will be fully launched in 2021, with a target price of 29.35 yuan for 2021, coverage for the first time, and a “buy” rating.
China Telecom is the only A-share listing platform that relies on operators to enjoy traffic dividends. Haobai Holdings is the vanguard and main position of China Telecom in grasping on the content side and getting rid of “pipelining” in the 5G era. Using China Telecom's abundant user resources and huge traffic dividends, it is expected that with the explosive growth of 5G users, 5G mobile users and home broadband users will be used as entry points to quickly open up downstream 5G applications.
Adhere to the CICT strategy and transform the Internet entertainment platform. In 2017, the company fully entered the Internet entertainment platform business through the acquisition of Tianyi Video, Colorful Interactive, Tianyi Reading, and Tianyi Ai Animation. The company is gradually downgrading traditional businesses such as credit operations and business travel bookings, and plans to make the entertainment sector account for more than 70% of revenue in 2021, with Tianyi Cloud Gaming as the main focus, Tianyi Ultra HD and Tianyi VR to create premium 5G applications.
Cloud Gaming has huge potential for high-quality tracks, and Tianyi Cloud Gaming strives to build the number one brand for operator games. It is estimated that by 2023, the national market size of cloud gaming in China will exceed 100 billion. Tianyi Cloud Gaming focuses on high-quality cloud gaming tracks and is China Telecom's core driving force for 5G downstream applications. Since Tianyi Cloud Games was commercialized in October 2019, hundreds of boutique games have been launched. 2020Q1, Tianyi Cloud Gaming has a cumulative total of 2,222 million registered users and 372,000 monthly active users, growing rapidly.
Risk factors: 5G construction fell short of expectations; demand in the cloud gaming and UHD markets was lukewarm; the company's performance fell short of expectations due to the pandemic; competition in the Internet entertainment industry intensified.
Investment advice: We evaluate the company's market value in segments: we expect the company's future core business, the cloud gaming business, to explode in 2021 and take shape in 2022. Therefore, when valuing the game business, we used the current value of the game business in 2022 to give 11 times PS to the game business in 2022, with a current value of 19.161 billion yuan. The traditional business gave 35 times PE, with a market capitalization of 2,012 billion yuan; the Internet entertainment business other than gaming gave 45 times PE, with a market capitalization of 2,181 billion yuan. The total market value of the company obtained by adding the three parts is 23.354 billion yuan. The current total share capital is 795,695.94 thousand shares, giving a target price of 29.35 yuan. First coverage, giving a “buy” rating.
