Industrial Securities: First to Holley Technology (301011.SZ) “Prudent increase in holdings” rating. Amusement equipment business is in good shape. IP card business has broad prospects_Individual Information_Market_中金在线

Zhitong Finance APP learned that Industrial Securities (601377, shares it) issued a research report and first assigned Holley Technology (301011.SZ) a “Prudent Overweight” rating. Parent net profit was 0.8/1.24/180 million yuan, EPS was 0.93/1.43/2.08 yuan, and the closing price on November 18 was 63/41/28 times corresponding to PE.

The main points of Industrial Securities are as follows:

The leading domestic commercial amusement equipment business covers the entire industry chain.

Holley Technology has been developing for more than ten years and has become one of the leading enterprises in domestic commercial game amusement equipment, integrating the design, research and development, production, sales and operation of game amusement equipment. In 2013, the company launched equipment cooperation business and animation IP derivative product business; in 2018, the company acquired Guangzhou Keyun to deploy terminal playground resources, and its business covers the entire industry chain. The company has a prominent position in the industry, a complete industrial chain, and a strong competitive advantage.

The business of amusement equipment is good, and the company has obvious advantages in its sales business.

In 2019, the output value of commercial game amusement machines was 14.4 billion yuan. There are many players in the industry and the competition is fierce, but most of them are small in scale and insufficient in research and development capabilities. The company is positioned as a mid-to-high-end equipment manufacturer with obvious advantages of “R&D + IP + channels”. In terms of research and development, the company has 146 domestic registered trademark rights, 118 patents, and 123 software copyrights; in 2020, the company’s product sales involving VR, AR, and 5G technologies accounted for 35.12% of its sales revenue.

In terms of IP, the company outsourced well-known IP to enhance its competitiveness and popularity, and has exclusive agency rights for 11 IPs including “Ultraman”, “Mario”, “Transformers”, and “Tomb Raider”; the company owns The research IP has also been recognized by the market, and the self-developed “Leadong” racing series products are sold abroad by SEGA’s agent. In terms of channels, the company has long-term and stable cooperation with well-known chain brand terminals at home and abroad, and has abundant channel resources. In 2021H1, the company’s game and entertainment equipment revenue is 99 million yuan, which is the company’s largest source of income.

The domestic card market is a blue ocean, and the company’s animation IP derivative business has broad prospects.

Trading cards have social, collection and game attributes, and have a lasting and far-reaching influence in the world. Compared with Japan, the scale of my country’s card game industry in 2020 is about 11.5 billion yuan. The company has exclusive agency rights for classic IP such as Ultraman, Dragon Ball, and Pokémon, which are renewed every year and the IP matrix is ​​relatively stable. The company’s card business is a new growth point, with a compound growth rate of 79.27% ​​from 2017 to 2019; the revenue of this business in 2021H1 is 82 million yuan, exceeding the full-year revenue of this business in 2020.

Among them, Ultraman cards contribute about 60% of revenue, while Dragon Ball has contributed 9.24% of revenue in four months after launching. Pokémon has contributed 5.74% of revenue in only one month after launching. It is expected to support high business growth in the future. In addition, after long-term deployment and accumulation, the company has put in about 7,000 equipment, which has formed a relatively high barrier. 2021H1 animation IP derivative business accounted for 32.70% of operating income (16.05% in 2020), and it is expected that it will become the company’s largest source of revenue by the end of 2021.

Risk Warning: Risks of increased market competition and stricter supervision of the game industry.

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