Yao Ji Technology started with playing cards and has established a leading position in the poker industry over 20 years. In recent years, the company has invested in the acquisition of a number of companies, successively laying out new fields such as mobile games, digital marketing, and sports culture. Among them, many of the leading products in the game business have performed steadily, and rapid growth has become the backbone of the company's revenue; the sports culture industry is still in the early stages of development, and there is broad scope for the future, which is expected to contribute additional volume to the company's revenue.
The rapid development of mobile casual games has increased the number of leading products. From 2018-2020, the company successively acquired Chengqi Technology and Dayu Sports and officially entered the field of casual mobile games. After years of rapid development and technology accumulation, domestic core products include the fishing category “Fly the Sky” and “Finger Tip Fishing”, etc., as well as “Love Whipped Eggs Every Day”, which recently participated in 10% of the head whipped egg games. Overseas main products include the Bingo series “Bingo Wild” and “Bingo Journey.” The company has stable sales of many game products, remains at the top of the iOS bestseller list all year round, and has strong player stickiness.
We have been deeply involved in the poker business for many years, and our performance in expanding production and increasing efficiency is steady. The company started with the playing card business. After more than 20 years of hard work, the “Yao Ji” brand has also gained a high market position and popularity in the playing card industry. The company has accumulated resources over many years, improved quality and efficiency in production technology, and the gross margin of the playing card business has remained above 20% for many years. In January 2024, the company raised and issued 580 million yuan of convertible bonds to invest in a production base with an annual output of 600 million playing cards, breaking through production capacity bottlenecks and leveraging scale effects.
The forward-looking layout of a collectible card circuit fully collaborates with the poker business. The company chose Star Card as an entry point for collectible cards, strategically invested in DAKA Culture and Card Hobby, the largest domestic card issuer, to lay out the sports culture industry and expand the comprehensive entertainment industry chain. The card game platform is actively developing competition IPs in various fields such as e-sports, entertainment, soccer, basketball, etc. The number of relevant audiences in China is huge, and the potential market space is broad. In addition, the company takes advantage of channel advantages and uses the marketing network accumulated by the poker industry to help promote and promote card business, and exert business synergy.
The first coverage gave it a “Highly Recommended” rating. Considering that the company's playing card business occupies a leading position in the industry, has a steady flow of mobile games, strong long-term operation capabilities, and a forward-looking layout of the emerging collectible card industry, we expect the company to achieve operating income of 48.32/53.69/5.853 billion yuan in 2024-2026, respectively, and net profit of 6.71/761 billion yuan. Corresponding to the current stock price PE is 14.8/13.0/11.2 times, giving it a “Highly Recommended” rating for the first time.
Risk warning: the risk that goodwill accounts for a large share of total assets, the risk of changes in industry policies, the risk of foreign investment risks, the risk of a large decline in the flow of active games and new games, and the risk of fluctuations in the supply and price of playing card raw materials