The readings of this report are as follows:
The industry has grown 5 times in 3 years, and the first-mover advantage is highlighted. Product intensive online, the performance of sustained growth can be expected. Byte Kuaishou core second ring traffic burst, casual games contribute the main content.
Main points of investment:
Increase the 2021 EPS to 4.05 yuan and maintain the target price of 90.70 yuan. The industry has grown 5 times in 3 years, and the first-mover advantage is highlighted. As one of the largest casual game suppliers with the largest byte jump, the company is expected to continuously copy new popular styles and enjoy the market dividend of the core second ring traffic by virtue of its outstanding industrial production capacity and data research and development system. Raise the EPS from 2020-2022 to 1.96max 4.05pm 5.59 yuan (the previous value is 1.96max 3.1max 4.65 yuan), and maintain the "overweight" rating.
Event: the company issued a forecast of quarterly results for 2021, and the company's 2021Q1 realized a net profit of 150 million 155 million, an increase of 966.13% over the same period last year and 1001.67% over the same period last year, exceeding market expectations.
New products have been launched intensively, and the performance is expected to continue to grow. The company focuses on the research and development of super casual games, with outstanding performance of products such as Q1 "synthetic Big Watermelon" and "mucus Simulator". New products such as crossword games "Magic Chinese characters" and "Digital Master" are expected to be promoted in the near future. This category is expected to bring considerable DAU and product duration because it can enhance the understanding of Chinese characters or digital space, strong interaction, broad and profound content materials. And after the music, intelligence, cool products to further enrich the company's product categories and user base.
Byte Kuaishou core second ring traffic burst, casual games contribute the main content. Under the background of the slow growth of DAU, user duration, CPM and advertising loading rate of the short video platform, both Byte and Kuaishou have increased the promotion of the core second ring traffic (content casual games, reading and tools). The size of the market is expected to grow from 30 billion in 2020 to 150 billion in 2023. Among the three major product categories of the core second ring traffic, leisure games benefit from high conversion rate and high user duration, and are expected to account for 70% of the traffic. The scale may exceed 100 billion in the next three years, and content providers with industrial production capacity are expected to benefit in the long term.
Risk hint: the new product launch is not as expected, and the traffic growth of byte fast hand earrings is not as expected.