“DNF Mobile Game” is highly anticipated by users. The launch performance is expected. According to the WeChat account of Dungeon and Warrior Mobile Games, “Dungeon and Warriors: Origins” (“DNF Mobile Game”) is scheduled to be launched on May 21. “DNF Mobile Game” is based on the classic mobile game “DNF” (Dungeon and Warrior) IP. “DNF” was developed by Neople, a subsidiary of Nexon, and launched in South Korea in 2005. After its launch, the game quickly became a global success, with over 600 million users. In 2008, the company distributed “DNF” as an agent in China, which became the fastest game to reach 1 million people online at the same time, and set a record for a peak of 5 million people online at the same time. As of 2018, the cumulative global revenue of “DNF” exceeded 10 billion US dollars. “DNF Mobile Game” was first announced in 2015, and the first closed beta was carried out in 2016. As of August 2020, the number of reservations exceeded 60 million. Up to now, the number of “DNF Mobile Game” reservations on the TapTap platform has exceeded 1.8 million, and the number of reservations on the Haoyou Express platform has exceeded 1.2 million. On the basis of restoring the original flavor of mobile games, “DNF Mobile Games” has been adapted to mobile phones and added richer gameplay and gaming experiences. As the leading IP product that users have been looking forward to for a long time, “DNF Mobile Games” is expected to bring impressive revenue and increased performance after launch. Based on the company's business expectations, we maintain our 2024-2026 profit forecast. The company's net profit for 2024-2026 is estimated to be 1567/1873/205.1 billion yuan, corresponding EPS is 16.6/19.8/21.7 yuan respectively, and the current stock price corresponds to PE 17.9/14.9/13.6 times, respectively. We are optimistic that new games and video numbers will drive the company's performance growth and maintain a “buy” rating.
Abundant game reserves are expected to drive continued growth in the game business
In addition to “DNF Mobile Games,” the company's reserve games also include “Breaking the Stars” (scheduled 2024Q2), “Wangzhe Chess”, “Operation Delta”, “Taris World”, “Need for Speed: Gathering”, “Pokémon Gathering”, and “Kalapichu” based on Wang Zhe IP. Among them, “Operation Delta” is based on classic mobile game IP, and the launch performance is expected. The rich product line drives the continuous growth of the company's game business.
The commercialization of video accounts is progressing rapidly, and there is still plenty of room for monetization
According to the company's announcement, the total number of video subscribers doubled in 2023, and video channel advertising made an important contribution to increasing the company's advertising business revenue and gross margin. According to the 2024 WeChat Open Course, the delivery scale of video accounts increased significantly year-on-year in 2023, and GMV was nearly three times that of 2022. We believe that based on WeChat's huge traffic, video e-commerce and advertising still have plenty of room to monetize, or continue to drive the company's performance growth.
Risk warning: The launch time or performance of the new game falls short of expectations, the commercialization process of video accounts falls short of expectations, etc.