Core ideas:
An ecosystem for hardcore gamers. Razer was founded in 2005, the core business includes hardware (game mouse, keyboard, notebook computer), software (RGB lighting system, etc.) and services (Razer Gold virtual credit score, etc.). The company's triceps logo is well-known in the global gaming and e-sports community, and focuses on high-specification products. According to the market size disclosed by Newzoo, the company has an 11% market share in global gaming peripherals, second only to Logitech's 16%.
The housing economy has resisted the impact of the epidemic, and the game industry has grown against the trend. Newzoo estimates that the global gaming market will exceed $160 billion in 2020, a year-on-year growth of 7.3%. As the global economy is affected by the novel coronavirus epidemic, consumers spend more time and money on online games. In addition, traditional large-scale sports competitions are suspended, and e-sports competitions are highly concerned. With the introduction of new game consoles (PlayStation/Xbox), new NVIDIA Corp independent graphics cards (Ampere architecture) and new games (Valorant) in the second half of this year, the game industry will usher in a new wave of craze.
He quit the lossmaking smartphone business in 19 years and installed it at a young age of 20. The company lost money due to the mobile phone business in 1819 (which ended in the first quarter of 1919). We expect the loss to narrow significantly in 20 years, due to: (1) the increase in the market share of game peripherals and the expansion of mobile phone peripheral business; the layout of high-growth cloud games; (2) with its user ecosystem, increase the market share of laptops in Europe and Chinese mainland (3) software product differentiation and future realization potential; (4) RazerGold transaction volume increases with micro-transactions; (5) Razer Fintech capitalizes on the rapid growth of Internet economy in Southeast Asia, provides one-stop business services in Southeast Asia, and expands the number of merchants to maintain high growth.
Profit forecast and investment advice. The annual revenue in 20-21-22 is expected to be US $9.31,10.77 and 1.246 billion respectively, and the profit margin benefits from the increase in the proportion of withdrawing from the loss-making mobile phone business and high-margin service business. The adjusted annual net profit of 20-21-22 is expected to be-9 million / 16 million / 43 million.
Using the DCF valuation method, the reasonable value is HK $1.38 per share, which is similar to the segment valuation method of HK $1.44 per share. The fair value corresponds to 1.2 times 1.0 times the 21-year market-to-sales ratio (EV/Sales) of 20amp, which is lower than the 21-year valuation of the peripheral industry, and is covered for the first time with a "buy" rating.
Risk hint. New business is not as expected, industry growth is slowing, profit margins are falling, and peer competition.