Source: Broker China
Author: Xu Ying

On June 25, the State Press and Publication Administration released approval information for domestic online games in June. A total of 104 games were approved. ranging$TENCENT (00700.HK)$,$G-bits Network Technology (603444.SH)$,$37 Interactive Entertainment Network Technology Group (002555.SZ)$,$IDREAMSKY (01119.HK)$,$Hangzhou Electronic Soul Network Technology (603258.SH)$,$Shenzhen Zqgame (300052.SZ)$,$Shenzhen Bingchuan Network (300533.SZ)$Games owned by companies such as Migu Mutual Entertainment are all listed.

As the summer program approaches, new summer games from various game manufacturers have attracted institutional attention, such as Tencent's “Need for Speed: Assemble”, “Breaking the Stars”,$NetEase (NTES.US)$“Operation Apocalypse”,$XD INC (02400.HK)$“Heartwarming Town”, etc. Some brokerage firms believe that the new game product cycle is still the core investment idea in the game sector at present, and that the performance of new games has exceeded expectations or is driving the revaluation of relevant listed companies. Some organizations also believe that as more versions are approved, customer acquisition costs continue to rise, and the unit economic benefits of new domestic games are on a downward trend.

104 games reviewed

A total of 104 games have passed the review this time. Among them, 11 games have been approved for mobile and client-side versions, 52 games have been approved for mobile versions, and 40 games have been approved for mobile-casual puzzle versions. Furthermore, “Desolation”, operated by Hokutoya Technology, is the only game approved for both mobile and web.

The edition issued in this release involves a number of listed companies.

Among the listed A-share game companies, the mobile and client versions of “Doulo Continent: World of Soul Hunting” under 37 Mutual Entertainment have been approved. The game was developed based on the well-known IP “Dora Continent”. The “Doulo Continent” IP Matrix originated from the transformative fantasy novel written by Tang Clan Sanshao. 37 Mutual Entertainment has previously released a number of “Doulo Continent” IP-adapted mobile games. Among them, the mobile card game “Doulo Continent: Battle of Spirits”, which was publicly tested on July 22, 2021, has continued to generate revenue for 37 Mutual Entertainment in recent years.

On the other hand, China Qingbao has 4 games approved, including “Adventu,” “The Amazing 0516,” “The All-Star Awakens,” and “Order of Time.”

Three games of Gibit's Thunder Games have been approved, namely “Taoist Friends Come to Dig Treasure”, “Black Star Heroes Become a Roster”, and “Asking Sword for Eternity.”

Furthermore,$CHINA MOBILE (00941.HK)$“Alliance Battle Song” developed by Migu Mutual Entertainment, “Shushen Era” by Electric Soul Network, and “Rising Star Wars” operated by Hainan Fujisawa Network, a subsidiary of Hikawa Network, have also been approved this time.

On the Hong Kong stock side, Tencent's “Rock Kingdom: World” received a version number. This is a game set in Rock Kingdom.

$BABA-SW (09988.HK)$Its spiritual rhinoceros interactive entertainment “Like a Kite” was approved. According to reports, “Like Kite” is a card game with a theme from the Three Kingdoms for women. The overseas version “Code Name Kite” was launched in the Hong Kong, Macau, Taiwan, Singapore and Malaysia markets in March 2023, and was in the top 10 best-selling lists on the App Store. Although the game has not yet been released on the national service, it has been discussed quite a bit by players.

In addition, “Bomb Mythical Group” under Chuangmengtiandi has also been approved.

New summer tours will be launched intensively

The Orient Securities Internet and Education Team believes that recently Hong Kong Stock Tencent's “DNF”, “Wang Zhe Rongyao Overseas”,$Bilibili (BILI.US)$The performance of various products, such as “Three Kingdoms Plan the World” and “Let's Go Muffin” by Heartcom, exceeded expectations.

Orient Securities pointed out that it will focus on major works by various manufacturers in the upcoming summer program, such as focusing on Tencent's racing games “Need for Speed: Assemble”, “Starbreak”, and “Manor House Merge.” NetEase, on the other hand, is paying attention to “Operation Apocalypse.” Xindong Company pays attention to “Heartbeat Town”. Bilibili follows “The Blazing Sky.”$Giant Network Group (002558.SZ)$The “Primitive Journey” minigame has been released. Unlisted companies are focusing on Miha Tour's “Desperate Zone Zero”, game science “Black Myths: Goku”, etc.

A recent research report by Minsheng Securities mentioned that the new game product cycle is still the core investment idea in the current game sector. It focuses on the testing and launch time of key new game products, and that the performance of related game products exceeds expectations, driving the revaluation of relevant listed companies.

According to the research report, judging from recent game performance, some new game products have performed well recently. For example, Tencent's “Dungeons and Warriors: Origins” has topped the iOS game bestseller list for 26 consecutive days since its launch; Bilibili's “Three Kingdoms: Designing the World” once ranked first on the iOS free list after its launch on June 14, the third in the iOS bestseller list.

However, some brokerage firms have recently indicated in research reports that the unit economic benefits of new domestic games are declining.

UBS Securities maintained the 12-month “Sale” rating of 37 Entertainment in a research report “37 Entertainment: Decline in the Economic Efficiency of Game Distribution Business Model Units” on June 19. The target price for 12 months was 12 yuan (previous value was 19.4 yuan).

According to UBS Securities, the deterioration in fundamentals of 37 Mutual Entertainment reflects a downward trend in the unit economic efficiency of new games in the domestic market: first, the revenue pool for new games has stagnated or even declined due to factors such as the life cycle of existing games and the number of players (almost flat); second, customer acquisition costs continue to rise as more new games are launched and more versions are approved. In this environment, UBS Securities believes that quality is more important than quantity.

Editor/Jeffy