Key points of investment
Dream World: Independent mobile game agency leading the way to create “self-development+IP+ community” Xinhuihuang Chuangmeng Tiandi Technology Co., Ltd. is a leading digital entertainment platform in China, providing a number of game-related services. Currently, its main businesses are iDreamSky Game (iDreamSky Game) and Fanbook. In 2011, the company released mobile games such as “Fruit Ninja” and “Angry Birds”. With high-quality agent games, it gradually became a leading mobile game agency. Since 2019, the company has gradually transitioned to self-research and gradually built a “self-research+IP+community” pan-game industry chain ecosystem.
Main business: Reserve new games ready to go, and Fanbook empowers game business companies to focus on the three categories of “elimination, competition, and RPG.” Many games have maintained an excellent user volume and revenue curve for over ten years since their launch. Among them, the proxy game “Subway Parkour” had a new year after being operated by Fanbook. Since 2019, the company has developed its own games in depth, including “The Adventures of DreamWorks,” “Global Action,” and “Honor All Stars.” In 2023, the company developed its own new tours “Karapicchu” and “Ni no Kuni: Interlaced Worlds”. Among them, “Carapiccio” won recognition from users by multiplying game quality and strong two-dimensional genes, and players' enthusiasm for innovation continued to rise. With the support of publisher Tencent's rich operating experience in shooting categories, “Karapicchu” is expected to continue to contribute to performance.
Fanbook: Empowering the refined operation of games, B+C commercialization in hope Fanbook is an instant messaging user community tool based on a “server+channel” architecture that was officially launched by the company in July 2021. It targets Discord, a benchmark product for overseas gaming communities, and has set up diverse channels to meet the various needs that players may encounter during game play, contributing to the refined operation of games.
Fanbook is expected to be commercialized on the B+C side. On the B-side, Fanbook can increase the certainty of investment in game production and research, obtain incremental user dividends, support long-term game lifecycle operations, and also help brands build a user community growth flywheel; on the C-side, Fanbook's embedded AIGC technology is expected to provide convenient and safe AIGC tools and services to many individual users.
Profit forecasting
We expect the company's operating income in 2023-2025 to be 28.08/38.30/4.579 billion yuan, up 2.72%/36.39%/19.55%; net profit attributable to shareholders of the parent company is 198/486/780 million yuan, up 107.95%/145.26%/60.40%; EPS is 0.13/0.31/0.50, respectively, at the closing price of August 25, 2023, corresponding PE to 21.41/8.73/5.44 . Considering that the company will launch many new gaming products with potential for popularity at home and abroad in the future, and that Fanbook, as a C-side commercialization space brought about by the game community driving the accelerated growth of the company's game business and AIGC's capabilities, is given a certain valuation premium. For the first time, it has been covered by a “buy” rating.
Risk warning
Risk of industry policy changes; risk of game version application; risk of core talent loss; launch performance of new games falls short of expectations; new business development falls short of expectations.