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中泰证券:24Q3游戏资金投入内缩外扩 盈利能力提升

Zhongtai Securities: In Q3 24, the internal contraction and external expansion of gaming funds have improved profitability.

Zhitong Finance ·  Nov 5 13:46

With the background of contraction, the effects of reducing costs and increasing efficiency are gradually emerging, and the profitability is strengthening. The operating profit for 24Q1 to 24Q3 were 2.4, 2.755, and 3.163 billion respectively, with a significant increase of 14.8% in 24Q3 compared to the previous quarter.

Wisdom Finance and Economics APP learned that Zhongtai Securities released research reports stating that according to the third quarter financial reports, the overall revenue growth rate of the game sector in 24Q3 was faster than the industry average, with a significant year-on-year increase in sales expenses and a contraction in both management and R&D expense rates. In the current market environment, the differences in product end are continuously narrowing. User acquisition requires more advertising spending, and the industry's overall strategic direction is to streamline internal expenses. Currently, institutions' positions in this sector remain low, the allocation demand has not been fully unleashed, and the valuation, due to the previous pessimistic interpretation, has risen but still remains within a reasonable range, remaining bullish on the subsequent market trends in the game sector.

Zhongtai Securities' main points are as follows:

The single-quarter revenue in 24Q3 increased by 7% year-on-year, slightly faster than the industry growth rate, with contributions concentrated in the top symbol.

The total for 24Q3 amounted to 19.978 billion, a 7% year-on-year increase and a 3.4% quarter-on-quarter increase. The overall revenue growth rate was faster than the industry average, with contributions mainly from the top symbols. Statistically, the quarterly Top 5 income companies collectively accounted for an increasing proportion, reaching 72.6% in 24Q3. Zhejiang Century Huatong performed exceptionally well in revenue in Q3, followed by Kingnet Network.

Sales expenses in 24Q3 saw a significant year-on-year increase, while the expense ratio decreased compared to the previous quarter.

The total sales expenses in 24Q3 amounted to 6.753 billion, a 20% year-on-year increase and a 1.8% quarter-on-quarter increase. The growth rate of sales expenses exceeded that of revenue. The significant year-on-year increase in sales expenses reflects the continuous narrowing of differences in the product end in the current market environment. User acquisition requires more advertising investment, and revenue generation is the primary requirement for game companies, resulting in continued high sales expenditure. However, in terms of quarter-on-quarter trends, since the beginning of 2024, the quarter-on-quarter sales expense ratio has been showing a downward trend, with the highest being 37.2% in 24Q1, 34.3% in 24Q2, and the latest 33.8% in 24Q3, benefiting from a slight increase in quarterly revenue. Looking at the first three quarters, Zhejiang Century Huatong and Kingnet Network matched high expenditure with high revenue growth, while Beijing Ultrapower Software achieved over 10% revenue growth with a 31.3% year-on-year decrease in sales spending.

In Q3 of 2024, both the management and research and development expense ratios shrank compared to the previous quarter.

In Q3 of 2024, the quarterly management expenses increased by 6% year-on-year, while the research and development expenses decreased by 2%. The growth rate of management and research and development expenses is significantly weaker than that of sales expenses, indicating a trend in the overall industry towards streamlining internal expenses. Since the beginning of 2024, the quarterly management and research and development expense ratios have shown a continuous downward trend, with the highest in Q4 of 2023 being 9.8%, and 8.1%, 7.7%, and 7.5% respectively in Q1 to Q3 of 2024. The research and development expense ratio was highest in 23Q4 at 12%, and 10.9%, 10.4%, and 10.3% in 24Q1 to 24Q3 respectively. This trend is similar to the trend in management expense ratios. Companies with year-on-year growth in R&D expenditure in Q3 include Rastar Group (+346%, mainly due to the capitalization of R&D expenses after the launch of new products), Kingnet Network (+36%), and Zhejiang Century Huatong Group (+26%). Research and development investment to some extent represents the future product competitiveness of the company, so this year's targets that are experiencing healthy and positive growth should be given particular attention.

The operating margin continued to improve in the third quarter of 2024.

Based on (total operating income - cost of goods sold - management expenses - sales expenses - research and development expenses), the operating profit in single quarter of Q3 2024 amounted to 3.163 billion, a 12% year-on-year decrease, and a 12.7% decrease compared to the first three quarters. Despite some year-on-year pressure, the trend shows a continuous improvement in quarter-on-quarter operating profit, with Q4 data expected to turn positive when comparing it to 23Q4's 2.35 billion. The operating profits for Q1 to Q3 of 2024 were 2.4 billion, 2.755 billion, and 3.163 billion respectively. The operating profit in 24Q3 saw a significant increase of 14.8% quarter-on-quarter, indicating that the effects of cost reduction and efficiency improvement are gradually becoming evident in a contracting environment, enhancing profitability. Looking at the quarter-on-quarter improvement in Q3, Hangzhou Electronic Soul Network Technology, Zhejiang Century Huatong Group, Kingnet Network, and Shanghai Yaoji Technology showed outstanding performance.

Investment advice: This round of market performance is derived from improvements in policies, industries, and companies. The market will continue to evolve as PE and EPS rise continuously.

Core recommended symbols: Kingnet Network (002517.SZ), Beijing Ultrapower Software (300002.SZ), with focus on Perfect World (002624.SZ), Shanghai Yaoji Technology (002605.SZ), Giant Network Group (002558.SZ).

Risk warning: Risks of product launch delays; Risks of product performance falling short of expectations upon launch; Risks related to industry policies and regulations; Risks related to forecast assumptions and data statistics.

The translation is provided by third-party software.


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