The company is a leading AR/VR content and service provider. It was covered for the first time and gave it a “buy” rating
The company is a leading AR/VR content and service provider. With its self-developed AR/VR engine, the company lays out a metaverse ecosystem to empower enterprises in various industries such as entertainment, the Internet, and e-commerce to achieve digital upgrading and business expansion. As a metaverse scenario application supplier, the company is expected to continue to benefit from the growth in demand for AR/VR content and services driven by the development of XR hardware and incentives related to the metaverse. At the same time, the company has established in-depth cooperation with internet giants such as Baidu, JD, Ali, and Tencent in the metaverse direction, or to further help the company expand its business. We predict that the company's operating income for 2023-2025 will be 1,483/19.16/2,319 billion yuan, respectively, net profit of 316/4.13/512 million yuan, EPS of 0.2/0.2/0.3 yuan respectively, and the corresponding PE of 7.7/5.9/4.7 times the current stock price, respectively. We are optimistic that the increase in the penetration rate of AR/VR scenarios and the increase in demand for 3D content will drive the company's long-term growth. For the first time, we covered it and gave it a “buy” rating.
Technology accumulation, first-mover advantage, and synergy between businesses jointly built a competitive advantage. In the early days, the company was a game company. It accumulated strong self-developed 3D engine technology through game development. Since then, the company has moved to B-side AR/VR content and services. Thanks to years of technical accumulation, the company has mastered a solid technical system, and the self-developed FT 3D engine has been continuously iterated, and its performance has been continuously improved. Years of project experience have also accumulated a large number of 3D model components for the company, forming a huge 3D model library, which can help developers quickly build 3D scenes. Furthermore, the company's various business segments form a closed business loop, which has strong synergistic effects.
AR/VR marketing services and AR/VR content services can promote AR/VR SaaS business. At the same time, the settings and layout of the AR/VR SaaS platform match the AR/VR marketing service process, thus empowering AR/VR marketing services. By using the experience of other businesses to find AR/VR marketing services or content that can be standardized, and launch corresponding SaaS products or modules in due course, the company further enhances the AR/VR SaaS business. As project experience is accumulated, the advantages of the company's FT engine and SaaS tools may become more obvious.
Increased penetration of AR/VR scenarios, increased demand for 3D content and services, or driving continued growth in company performance. We believe that the shift of digital content from 2D to 3D may be a long-term trend. As the performance of various platform hardware, especially XR hardware, improves, the penetration rate of AR/VR scenarios is expected to continue to increase, driving rapid growth in demand for 3D content and services. Furthermore, overseas travel and TOC product expansion are also expected to become new growth points for the company's performance.
Risk warning: The development of the metaverse falls short of expectations, increased competition in the industry, and the number of projects falling short of expectations.