- September 02, 2021
We published a research note on CMGE (302 HK) to reiterate our Buy rating with a new PT of HK$6.9, which comprised HK$6.4 for game by applying 13x FY22E P/E, and HK$0.5 for the strategic investment for its IP ecosystem:
- Top hits start to contribute meaningful revenue in FY21E/22E
- The New Legend Of The Condor Heroes: Iron Blood and Loyal Heart (新射雕群俠傳之鐵血丹心) launched in 2H20 – within the first month, it collected more than RMB300mn of gross billings, according to CNG;
- Soul Land: God of Battle Arise (斗羅大陸－斗神再臨) launched in Apr 2021 – has been listed on best-selling recommendation of Apple’s App Store several times ;
- another 3 games exclusively partnering with Tencent and ByteDance have been just launched this May/Jun.
- Continuous investment in IP, self-development, strategic cooperation
- As of 30 Jun 2021, CMGE held a total of 118 IPs (50 licensed IPs/68 proprietary IPs), the largest number of IPs among the game companies in China;
- invested three quality game developers in 1H21 to further building its self-development capability;
- video streaming platform – Bilibili acquired a further stake in CMGE to 9.32% as of 30 Jun 2021, which will enhance the company’s IP-based game publishing and development business, in our view.
- 1H21 results recap
- Total revenue came in at RMB2.18bn, up 27.2% YoY, among which game development revenue jumped by 156.8% YoY to RMB567mn;
- Gross profit grew strongly by 58.0% YoY with a GPM of 38.5% vs. 31.0% in 1H20 and 32.0% in the full year of FY20, thanks to increasing proportion of self-development and publishing games;
- Adjusted net profit was RMB388mn by excluding fair value gain/loss of strategic investment, up 34.8% YoY, compared to RMB288mn in 1H20.
