Gold: Mobile games screen is small, but the future can not be underestimated

CICC launched its "mining of structural opportunities: a deep analysis of China's online gaming industry" on February 1, 2012, the first time CICC has covered China's online gaming industry and given the industry a neutral rating.

CICC believes that although the online gaming industry has been depressed for the past three years, the main listed companies are low valuations, but the industry as a whole is still in the transition phase, most of the game companies still face a small challenge. Therefore, CICC believes that the industry's overall rebound opportunity has not yet come, but there are structural opportunities in the industry. CICC's research on the online gaming industry employs a framework of "basic value + OPTION value" Investment research with a common approach to the market and focuses on the predictability and sustainability of future growth in the existing game product lines of companies. Based on the above framework, CICC maintains Tencent's recommended rating (HK $220) and for the first time focused on NetEase (recommended, target price of USD 58.80) and swim (recommended for 28.60 US dollars).

The market is in a transitional period and the market segments are different. As a result of age, employment and income structure changes, Internet users online entertainment time presents a fragmented trend, resulting in game time and play more flexible online games by the players increasingly favored. Therefore, on the one hand, the large-scale multiplayer online role-playing game (MMORPG) market scale growth is slowing down, inhibit the overall online game market growth; On the other hand, advanced casual games, web games and mobile gaming markets are entering a fast-expanding channel, the future space is huge. Of course, these emerging market segments are still in the early stages of their own development cycle, the overall online gaming market contribution is limited.

There are other investment research frameworks in common with market methods. CICC believes that the value of the company's shares should include two parts: the basic value determined by the predictability and sustainability of the existing game product line growth, and the value of options to measure the success rate and profitability of the new game. Because the value of option has many uncertainties, CICC believes that the basic value should be the decisive factor in the investment decision, and the option value is the auxiliary factor. In CICC's view, a combination of market trends and diversification of the game product line can directly help a gaming company in the fierce market competition to stand out. At the same time, CICC also optimistic about a number of excellent online research and development capabilities, and has a wealth of operating experience, and reserves the game to meet market trends of the Games company.

Valuation and recommendations

NetEase: Recommended, the target price 58.80 dollars. NetEase has a strong and diversified network of online product lines, a wealth of online gaming reserves and based on e-mail user platform. The target price is 12.2 times times that of non-US GAAP in 2012 years.

Swim: Carefully recommended, the target price of 28.60 dollars. It is expected that in 2012, "Tianlong Eight" will continue its strong growth momentum, and "Pinball Hall" will also be stable in the promotion, while the 17173 platform for the long-term contribution to the tour. The target price is 5.6 times times that of non-US GAAP in 2012 years.

Shanda Games: Neutral, target price 3.80 dollars. Optimistic about the prospects for the short and medium term operation of the core games, but cautious about the localization of the newly introduced games.

Giant: Neutral, target price 5.00 dollars. Optimistic about the performance prospects of "Journey" and "Journey 2", but was cautious about the long-term sustainability of its game product line.

Perfect World: Neutral, target price 11.75 dollars. In the short term, domestic business strategy transformation pressure is greater, but the overseas business continues to be positive.

Risk

(1) Online game players are tired of the main client network games;

(2) From other network services, such as network video and E-commerce, the competition is increasing;

(3) Major technical or operational errors in the main information of the popular games or the new games which are more concerned;

(4) The product cycle risk of classic hot game.

In the industry as a whole emerging trends, CICC has the following views:

First, the industry transformation, segmentation market differentiation market growth slowdown

1, Hot classic games in the online game market still leading coquettish; 2, the new game success rate is low 3, segmentation market differentiation

Second, the online user interest changes

1, the user age of Chinese online games has structural changes;

2, the net swims the user interest to change;

3, the Internet has diversified development

Third, the client network game: not only the traditional MMORPG

1, MMORPG: High user stickiness and high entry threshold;

2, advanced leisure games have greater growth potential;

3. Content, innovation and execution: three key factors that determine the success or failure of a client network game

Four, the webpage game: is taking off the blue sea market

1, the Web game market for developers and operators to enter the threshold is lower;

2, web games for users more flexible, more leisure and more integrated;

3, the income growth potential is considerable;

4, the Strategy class webpage game, the role plays the kind of webpage game and the child webpage game is quite popular in the market;

5. Social Games: The flourishing of social networks and Microblogs provides a boost to the growth of the social gaming market;

6, the main network gaming companies are facing opportunities

Five, mobile phone games: small screen, but the future can not be underestimated

1, under the impetus of multiple factors, mobile game market rapid growth;

2. Diversified charging mode;

3. Platform contention