Kaiying Network is a leading player on the legendary game circuit in China. In recent years, Kaiying Network has successfully transformed into a well-known domestic game company. Its main products include “Legend of the Blue Moon”, “Original Legend” and “Battle of Angels”. Tracing the company's development history, the company started in the Pageview era and accumulated strong R&D and operation capabilities on the legendary circuit through its own team and external integration; in the past few years, the company briefly stagnated due to internal and external changes, but in recent years all the company's historical issues have been clarified, the future direction of development has been clarified, and a new stage of rapid development has begun.
Industry background: Legendary and nostalgic games still have prospects. IP games are a hot trend in the industry. IP games are a relatively popular direction in the game market. The traffic value of mature IP combined with mature gameplay has certain advantages in product development and promotion: 1) In a market where stock competition tends to occur, IP games have a certain audience base, which helps to partially eliminate the uncertainty of product performance; 2) IP may help games escape the problem of homogenization of gameplay: 3) Some classic global IP games may help game manufacturers go overseas; 4) IP players are more willing to pay and IP It brings players lower search costs. We believe that building game IPs or game products developed based on strong gaming IPs may still have good development prospects.
We believe that the stock of Legendary Raceway is relatively stable, and it is expected to tap into a certain increase: 1) In terms of inventory, the legendary game itself has excellent gameplay, numerical design, and emotional bonuses, a stable core audience, and relatively strong payment capacity. Combined with continuous upgrades, gameplay, and version iterations from manufacturers, it is expected that the legendary circuit will remain stable; 2) In terms of potential growth, the legendary game player base has some potential to expand; in addition, the IP dispute for legendary games is gradually settling down, and the genuine market and leading R&D and operating manufacturers may be able to open up new market space. Legendary game makers that have a deep understanding of user habits and numerical systems in terms of R&D, continuous version iteration and campaign operation capabilities in terms of distribution, and genuine legendary IP licenses are expected to continue to be competitive on the legendary circuit.
Kaiying Network has a significant advantage in the retro feeling circuit, and business expansion opens up room for growth. The company has significant advantages at the legendary and other retro feeling tracks. The basic market continues to be stable, and its capabilities are expected to expand to multiple tracks. 1) At the R&D level, the company integrated Zhejiang Shenghe, the leading developer of the legendary circuit, and its R&D strength was further strengthened; 2) At the distribution level, the company used early platform business accumulation and products such as legendary boxes to deepen the layout of the track around legendary game operations and channels, and opened up new promotion methods through live streaming, etc., combined with establishing good cooperative relationships with many publishers to explore user and flow growth; 3) At the IP level, along with the clarification of legendary IP relationships, the company opened up upstream and downstream industry chains and formed strong partnerships with legendary game IPs and publishers Hand in hand to create legendary IP The ecosystem is expected to continue the vitality of legendary IPs and drive incremental market expansion.
Actively expand the boundaries of capabilities, perform brilliantly in a variety of innovative categories, gradually verify the expansion of categories and overseas capabilities, forward-looking layout of the IP game market, and rich IP reserves are ready to go. On the basis of the company's successful development and operation of legendary games, the company further extended its R&D capabilities to other nostalgic IP games and other categories, while actively developing new channels such as mini-games. Looking forward to the future, the company's many youth-oriented IP games are expected to continue to tap the potential of users and categories, accelerate innovation and transformation, and build a new growth track.
Profit forecasting and investment advice
The company's stock of legendary track games brought strong performance certainty to the company. The launch of innovative categories and mini game track products gradually unleashed performance flexibility, and the addition of rich IP games will be realized one after another, bringing high growth to the company. Considering the steady performance of the company's core circuit, the successful expansion of new tracks, and a rich pipeline of reserve products, we predict that the company's net profit for 2024-2025 will be 1.80 billion yuan/210 billion yuan, respectively, corresponding to PE of 11.3 times/9.7 times, covering the first time, giving it a “buy” rating.
Risk warning
1. Risk that product version approval, launch progress and flow performance fall short of expectations; 2. Industry regulatory risks; 3. Competition in the game industry exacerbates risks; 4. Profit prediction assumptions are unfounded or fall short of expectations.