As a veteran of the domestic mobile game market, the company is “boutique, pan-entertainment, platformization, and globalization”
The strategy is based on both endogenous growth and extended development. In June 2009, through the dual parallel path of endogenous growth and extension development, the company continued to increase its quality research and development capabilities for mobile games and Internet page games. After years of refinement, the company's mobile games and page game products have fully covered mainstream game genres such as cards, heavy ARPG, leisure, racing, shooting, sports, strategic tower defense, etc., and has become the developer and publisher of all product categories in the industry.
Highlight 1: The company has a clear lead in the development and operation of miracle games, and the success rate of big IP+Tencent intermodal transport is high. The subsidiary Tianma Space-Time is a leader in domestic miracle game development. The company has invested in Netzen, and the business cooperation is even closer. Tianma Shi quickly became a leading game developer in China with the phenomenal hit mobile game “National Miracle MU” in 2014. “National Miracle MU” is the first miracle mobile game in China authorized by Korean Netzen. After its launch, it quickly became popular all over the world, becoming one of the most popular mobile games in 2014. In 2018, Tianma Space-Time launched the second miraculous work “Miracle MU: Awakening”. With Tencent's distribution agent, it once again achieved excellent results in a difficult market environment with limited editions. “Miracle MU: Awakening” became another hit under Miracle IP.
Highlight 2: The company's R&D investment and team training over the years, the product quality is high and stable, and the success rate of diversified products can be replicated. PalmFun Technology focuses on R&D talents. The proportion of R&D expenditure and number of R&D personnel is relatively high. The company deepened internal organizational restructuring, optimized the personnel structure, improved the efficiency of the company's operations, and enhanced the development capabilities of quality games. Four major game subsidiaries have been gathered through outreach mergers and acquisitions. The R&D strength base is deep, and the output efficiency and popularity rate are guaranteed. The four major game subsidiaries of PalmFun Technology all have many years of R&D experience and many outstanding works. Tianma Spacetime is representative of the MMORPG mobile game “National Miracle MU”, which launched the hit “Miracle MU: Awakening” in 2018, and has rich experience in miracle mobile games. Play Crab Technology Chanpin covers various types of mobile online games such as role play, strategy, cards, action, etc., and has already launched “King of Fighters 98: Ultimate Battle OL” and “One Punch Man:
There are many mobile game blockbusters such as “The Strongest Man.” The company adheres to the core position of “technology enterprise” and has made certain breakthroughs in the field of Unity3D, H5, and Unreal game engine framework construction. Many of its subsidiaries have mastered the technology related to the Unity3D engine to a large extent, launched many successful 3D games, and accumulated a great deal of R&D experience for the company.
Highlight 3: A rich product line helps long-term development. “Miracle for All 2” is PalmFun Technology's third miracle-type mobile game. 2021Q2 is online. The first two works “Miracle for All” and “Miracle MU: Awakening”
They all have excellent sales performance, which has laid a huge foundation for the number of Miracle IP users in China. There are many Miracle gamers, and they have a very strong sense of miracle. “Miracle for All 2” was built using the Unreal 4 engine, and the quality was greatly improved. Miracle IP+Unreal 4 engine, “National Miracle 2” is expected to replicate the good results of “National Miracle MU” and become PalmFun Technology's main revenue force in 2021. PalmFun Technology has a rich inventory of game products. A number of new games will be launched in 2021. In addition to miracle games, the company will also continue to expand the market in other game categories. The two-dimensional tower defense strategy game “Those That Need to Be Guarded”, the sandbox strategy game “Hypnos”, and the action game “Tides of Darkness” have received a high number of reservations on the TapTap platform and are highly anticipated by players.
Profit forecast and investment rating: We expect the company to achieve operating revenue of 1,668 billion/2,366 million/2,721 billion yuan respectively in 2020-2022, and net profit of 646 million/997 million/1,075 million yuan respectively, up 77.7%/48.1%/18.2% over the previous year. EPS is 0.23/0.35/0.39 yuan respectively. The corresponding PE is 22X/15X/13X respectively, giving a “increase in holdings” rating. We are still optimistic about the company. Long-term game monetization capabilities brought about by a diversified product matrix brought about by strong R&D capabilities in the future.
Stock price catalyst: the launch performance of the new game exceeded expectations; risk factors for the company's diversified category strategy to achieve results: the risk of tighter regulation of game policies; the risk of game development failure; the risk of game product performance falling short of expectations; intense competition in the buying market, and a sharp increase in costs squeezing profit margins.