We gave Dream World a “buy” rating for the first time, with a target price of HK$4.85. Given the company's huge potential in increasing profitability and the deep power it has accumulated in game self-development, we have given Creativity a market sales rate of 2.3 times that of 2023, with a target market capitalization of HK$6.8 billion.
As one of China's leading game companies, Chuangmendi (the “Company”) will benefit from the long-term development of the industry.
With its rich experience in managing the full life cycle of games, the company has built up deep game distribution and operation capabilities and a solid R&D foundation. We expect that the company's long life cycle games will continue to generate stable revenue, while its self-developed capabilities will regularly generate new revenue growth for the company. The company specializes in introducing overseas boutique games to the Chinese market, and distributes and operates after improving the localization of games to adapt them to the Chinese market. In the process of localizing and secondary research and development of overseas boutique games, the company has accumulated rich R&D and operation expertise in overseas markets, which provides a certain advantage for its games to expand overseas.
We believe that after the company discovers less profitable game projects, its self-developed games are expected to bring the company room for revenue growth that exceeds expectations, and will bring about a significant increase in profitability in the short term. In the past few years, the company has recorded significant losses in the development and business trials of various game types, causing the market to worry about the increase in its profitability. In fact, after several years of trial and error and business adjustments, the company has now determined a game development direction that can support its continued profitability, focusing on developing competitive games that it excels at. The new self-developed game “Carapiccio”, which is about to be officially released, is expected to bring great commercial value to the company. After the business strategy was adjusted, the company had already eliminated businesses that dragged down profit margins and began developing high-quality revenue sources.
Catalyst: Relevant news released by the company's self-developed games; games operated by the company received praise from the industry; the company received a new game version number.
Risk: Future new travel R&D projects may not proceed as planned; uncertainty about China's game industry policy.