Recently, Internet giants at home and abroad have been deploying meta-universe ecological news. Nvidia, Microsoft and other technology giants have expressed their views on entering the game. The popularity of the meta-universe industry has continued to rise, which has also brought catalysis to the A-share game sector.
In the past six months, under the influence of policy and fundamentals, the share prices of the A-share and Hong Kong-share game sectors have also shown certain fluctuations. At present, the clarification of regulatory policies will help investors return to rationality. Overlapping leading companies’ future new product upcycles, increasing games going overseas, and the continuous implementation of new technologies such as Meta Universe/VRAR, the sector is showing a certain trend of recovery.
The game sector policy bottoms out. Leading company’s new products are excellent
At the end of August, the most stringent law on the protection of minors was promulgated, restricting online games for minors to 20-21 o’clock every day on Friday, Saturday, Sunday and legal holidays. As a result, investors can clearly quantify the impact of the policy and further clear the risk of the sector.
According to the announcements of listed game companies, the proportion of minors’ turnover is limited, which has little impact on the realization of manufacturers. At the same time, it is expected that underage players will focus on head games for a limited time, which will further strengthen the industry’s boutique research and development trend in the long term.
In addition, the game version number from August to November has not been issued yet, or it is mainly related to the anti-addiction policy and version number review adjustment. It is expected that the version number will be re-issued in the near future, and the policy sentiment will gradually return to rationality. In the short term, top manufacturers have a rich product reserve with version numbers, long-term operation of classic products, and short-term suspension of version numbers have limited impact on performance; in the medium and long term, stricter version number review drives the high-quality development of the industry, and content is king in the new landscape. , High-quality game developers will consolidate barriers to competition and thus have more investment value.
At the same time, starting from the second half of last year, the fundamentals of the game sector have been greatly affected by factors such as increased purchase costs and new product delays. However, since this year, leading companies have re-entered the new product upward cycle and their performance is expected to improve significantly. Among them, NetEase’s “Harry Potter Mobile Games” and Tencent’s “League of Legends Mobile Games” were launched in September and October, ranking Sensrortower’s October global popular mobile game revenue 9th and 5th respectively. New products from leading A-share companies have also performed well. Sanqi Mutual Entertainment’s “Douluo Dalu: Soul Master Showdown” (July), and Gigabit’s “One Thought Happy” (February) has been launched and has remained at around 10 on the iOS best-selling list, a perfect world. The number of TapTap reservations for the new game “Phantom Tower” exceeds 1.38 million.
In addition, Chinese manufacturers’ mobile game overseas performance has become a bright spot. In recent years, head game manufacturers have built up overseas teams, and many products have been distributed globally. Gamma data shows that in the first half of 2021, China’s self-developed games overseas market revenue is 8.468 billion U.S. dollars, and it is expected to exceed 17 billion U.S. dollars for the whole year, a year-on-year increase of 10.0%. In 2020, the number of global mobile game users is 2.68 billion, which is about three times the domestic market, and the overseas market has a vast space. Looking forward to next year, the increase in the number of games going overseas will overlap the upward cycle of new products. It is expected that the fundamentals of the sector will continue to improve, and the profitability of leading companies will have relatively high flexibility.
The meta-universe triggers the reverie of the game sector in 2022
At present, the popularity of the Meta Universe industry continues to rise, which will also bring catalysis to the A-share game sector in 2022.
Specifically, in recent years, consumer-grade VR all-in-ones have entered the public’s field of vision, and portability, 4K display technology, and 6Dof interactive technology have been fully upgraded, driving the rapid increase in VR headset shipments and user penetration. Meta’s Oculus Quest2 is the flagship all-in-one machine. Since its launch in September 2020, the proportion of active VR headset users on the Steam platform has continued to increase, reaching 35.02% in October 2021. In 2021, domestic manufacturers Pico and iQiyi will also launch self-developed VR headsets. Research all-in-one machine PicoNeo3 and iQiyi Qiyu 3.
From the perspective of the content layout, overseas top VR masterpieces have entered a payback period, and the business model is gradually verified. The revenue of the audio game “Beat Saber” and the 3A shooting game “Half-Life: Alyx” both exceeded 100 million U.S. dollars. As of February 2021, there are 69 games with revenues of more than US$100,000 on the Quest platform, an increase of 31 games from September 2020; the number of content on the Steam VR platform in October 2021 exceeds 6,000.
On the whole, the current software, hardware, and content upgrades have driven the VR industry’s flywheel to begin to revolve, but it is still focused on overseas hosts/hardcore users to try and experience. It has not yet entered the pan-user field, and the country is still in the early stage of development due to content and other constraints. Behind the industrial upgrading is the continuous investment of major technology companies. At present, giants at home and abroad are accelerating their entry. In the future, we still need to pay attention to whether key technologies can be continuously improved and integrated to bring content ecology and user experience upgrades.
The smartphone wave brought about by the transition from 3G to 4G has driven both the valuation and performance of mobile game companies to increase, and games may become the starting point to promote the prosperity of the VR/AR industry content ecosystem, driving the continuation of the beta market of the sector. In this context, Metaverse’s investment in game companies is reflected in the increase in valuation in the short-term, and investors can pay attention to the implementation of VR products of game companies in the medium and long-term.
Overview of the performance of some listed game companies
At this stage, the core strategy of investing in game stocks is to select companies with improved fundamentals and flexible valuations. However, we should beware of the thematic hype to catch up with high risks. The performance side focuses on the performance of new products of leading companies and the increase in new businesses (such as games going overseas). The continued catalysis of industry trends such as Meta Universe is expected to increase the valuation center of the sector.
