The company's 2020 merger and acquisition of hippo games into the field of leisure games, the development of Internet business. The company's predecessor, Nantong forging, landed on the gem in 2011. In 2017, the company acquired a 100% stake in Shenzhen Olive Leaf Technology and entered the field of advertising and marketing. In 2018, the company changed its name to Zitian Technology. In 2020, the company completely spun off the traditional forging business, and in October of the same year, it acquired Clockwork and its hippo game to enter the Internet field. Hippo Games is a leading R & D and publisher of casual games in China. At present, the company has released more than 20 games, with an average of 1 million downloads. In recent years, the company has launched "Ludo Master", "synthetic watermelon", "mucus simulator" and other popular super leisure games, downloads, activity data in the forefront.
Rely on the leisure game layout traffic entrance, fully enjoy the short video platform outside the traffic to realize the dividend. Pangolin Advertising Alliance, as an important part of byte advertising ecology, mainly undertakes the aggregate distribution of its off-site traffic. In the first three quarters of 2020, the proportion of APP usage hours outside the five Internet giant systems was 21.2%, of which the time coverage of pangolin alliance was more than 70%, and the coincidence between pangolin platform users and byte master site users was less than 20%. It can be seen that the advertising market of pangolin alliance is still a blue ocean with huge incremental space. The pangolin advertising alliance connects with the company's game background, relies on the platform's big data and algorithm, distributes its own advertising materials to the company's APP, and then divides the advertising revenue into payments to the company. From the company's point of view, if you get the traffic import of the byte system, the advertising realization efficiency will be greatly improved.
Under the flow play, industrial production is the core. Big data empowers the game research and development to improve the success rate and seize more traffic entrances. Ultra-casual games are small in volume, low in research and development costs, and advertising is the main source of income. the essence of its business model is not to sell products, but to earn the price difference of traffic. Under this mode, the advantages of hippo games are as follows: 1) have super leisure game research and development genes, accumulate rich project experience, and can industrialize and scale the game research and development; 2) cooperate with large Internet manufacturers, feedback big data empowered products to improve the success rate of production 3) the inherent gene of the company is traffic operation. In the future, the company is expected to further expand its traffic layout in the areas of tools, consulting, reading and so on, so as to expand its own traffic entry.
Relying on XIAOMI mobile phone pre-installed games, cooperation with Kuaishou Technology to build an incubation base, overseas income opens up room for growth. Hippo games and XIAOMI to achieve a number of games pre-installed cooperation, such as "Ludo Master", "Block Puzzle", "Pop ShooterBlast" and "Crazy Juicer", hippo games will benefit from XIAOMI's continued growth in overseas mobile phone shipments.
Based on the successful experience of the incubation team in the past, Zitian Technology and Kuaishou Technology set up a joint venture to expand the scope of service and upgrade the quality of the incubation base.
Investment suggestions and valuation: relying on short-term video station traffic to realize dividends, hippo game industrial production capacity is outstanding, to create a flow operation platform, long-term development can be expected. It is estimated that the net profit of 20211x2022 is 606 million yuan / 868 million yuan respectively, an increase of 94.8% and 43.4% compared with the same period last year. With reference to Palm Technology and Saturday, which also benefits from byte-beating traffic dividends, the reasonable market capitalization of 2021 yuan is expected to be 18 billion yuan, corresponding to 30XPE, which will be covered for the first time and given a "buy" rating.
Risk tips: high goodwill balance risk, advertising business competition aggravating risk, game policy risk.