Game Business Overlay with Intelligent Computing Power Concept: Century Huatong Accelerates into a Growth Channel

Entering July, the A-share market has ushered in the mid reporting season again, with many companies with increasing performance taking the lead in sending out "good news" to the market. As the leader of the gaming industry, Century Huatong has also released a beautiful semi annual pre increase announcement to the public

Entering July, the A-share market has ushered in the mid reporting season again, with many companies with increasing performance taking the lead in sending out "good news" to the market. As the leader of the gaming industry, Century Huatong has also released a beautiful semi annual pre increase announcement to the public. The announcement shows that the company expects to achieve a net profit attributable to the parent company of 800 million yuan to 950 million yuan in the first half of the year, a year-on-year increase of 64.76% -95.65%, and a significant rebound in performance.

In addition to impressive performance, Century Huatong's stock price performance this year is also very eye-catching. As of the close on July 14th, the stock price has risen by 76.38%, ranking among the top in the industry. Haitong Securities Research Newspaper believes that Century Huatong's classic games have stable performance and abundant reserves of new tours. With reference to comparable companies, the company will be given 35~40 times of dynamic PE in 2023, and will be rated "better than the big market" for the first time.

The recovery of the gaming industry is evident; Comprehensive valuation restoration

On the version side, with the approval of 89 domestic online games before the Dragon Boat Festival, the number of domestic online games released in the first half of 2023 will reach 522, which is more than the number issued in 2022, and the number of single wholesale games will exceed 85, which is equivalent to most of the batches in 2021.

In terms of sales, although there is still a certain gap compared to the same period last year, the market size has significantly increased month by month. According to the "April 2023 Game Industry Report" (hereinafter referred to as the report) released by Gamma Data, the actual sales revenue of the Chinese game market in April was 22.494 billion yuan, an increase of 2.96% month on month, maintaining the momentum of listing month on month for two consecutive months.

The frequent release of positive industry information has also gradually stabilized the valuation of the A-share gaming sector. According to media statistics, the Shanghai Composite Index rose 3.65% in the first half of the year, while the gaming ETF tracking the gaming industry (159869) rose 92.53% in the first half of the year, ranking first among all ETFs in the market.

The Open Source Securities Research Report pointed out that the stable distribution of game titles helps to promote continuous improvement in the supply side of the game market, while enhancing market confidence, providing guarantees for various game manufacturers to continuously increase research and development investment, create high-quality games, and add technology empowerment such as AIGC to drive the long-term stable growth of the game industry.

Classic end game stable performance market; Frequent highlights on the overseas race track

From the perspective of the overall domestic gaming market, mobile games account for almost half of the market share and have become an important factor determining the size of the entire gaming industry market. In the past few years, due to intensified competition, the mobile game market has become exceptionally competitive. Many products have lifecycles ranging from one year to several months, making the performance of gaming companies like a roller coaster ride. However, the supply volume of the client game market is much smaller than that of the mobile game market, and it presents a trend of monopoly by giants, which makes the entire market develop steadily and increase year by year, although its scale and growth rate cannot match that of mobile games. The report from Gamma Data indicates that in April 2023, the actual sales revenue of the Chinese client game market reached 5.561 billion yuan, an increase of 0.20% month on month and 12.60% year-on-year,

As a leading gaming company in the industry, Century Huatong is one of the few companies in China that has a large number of high-quality client games. Its subsidiary Shengqu Games operates a large number of high-quality client games, and through long-term operation strategies, these products have always maintained high vitality. According to official disclosure, multiple products including "Adventure Island", "Legend World", and "Eternal Tower" will undergo intensive updates, which are expected to increase the daily activity and revenue of the products, providing a solid foundation for Century Huatong's performance this year.

Compared to the Red Sea in the domestic gaming market, the overseas market still has enormous potential and is one of the largest sources of growth in the industry. Last year alone, China's self-developed gaming overseas market revenue reached 17.346 billion US dollars. However, with the increasing number of overseas gaming companies, the competition in the overseas gaming market has also become increasingly fierce. Diandian Interactive, a subsidiary of Century Huatong, is one of the earliest domestic gaming companies to go global, with a distribution footprint covering over 200 countries and regions worldwide. In the past, Diandian Interactive mainly focused on product release, but in recent years, it has continuously strengthened its self-developed capabilities and achieved breakthroughs in multiple tracks of leisure products. Since last year, its "ValorLegends: Eternity" has not only ranked first on the iOS free list in 7 countries and top 20 in a total of 57 countries, but also topped the iOS free list in South Korea for 11 consecutive days; FrozenCity, a survival mobile game for the end of ice and snow, quickly entered the top 10 free rankings in 40 countries and regions after its launch, with revenue exceeding one million US dollars in the first month; Another ice and snow apocalypse themed mobile game, "WhiteoutSurvival," stood out among a group of local RPG mobile games and ranked 8th on the best-selling Korean mobile game list in June.

Due to the performance of multiple products, Diandian Interactive's industry ranking continues to rise. According to the June 2023 global revenue ranking of Chinese mobile game publishers released by third-party agency SensorTower, Diandian Interactive ranked 7th, which has once again increased from last month's ranking; Since the beginning of the year, Diandian Interactive has continuously increased its ranking by 11 places. At present, the proportion of overseas revenue from Diandian Interactive self-developed games has exceeded 70%, and the overseas revenue of self-developed games maintains a double-digit growth rate every year.

Advanced layout of intelligent computing power; The Future Imagination Space of Cloud Data Business is Huge

Cloud data business is an area that Century Huatong began to lay out three years ago. Previously, some investment institutions believed that the investment amount in data centers was large and the return was relatively slow, so they did not provide corresponding valuations. As a result, Century Huatong's stock price did not truly reflect the value of cloud data business for a long time in the past.

However, whether it is national policies in recent years or the development of the entire cloud data market, cloud data business is a very promising business. In addition, due to the long construction cycle of the entire project and high requirements for funding, technology, and energy consumption, large data centers in first tier cities are very scarce resources. At present, two Big data of Century Huatong are located in the two most developed regions of the Internet in China, of which Tencent Yangtze River Delta Artificial Intelligence Advanced Center, located in Songjiang District of Shanghai, is the largest GPU computing cluster in China, with 40000 planned cabinets; The Shenzhen Yifeng Technology Bright 5G Big data Center, located in Guangming District, is the largest approved data center in Shenzhen, with 12000 planned cabinets. At the same time, the Century Huatong Shanghai project is deeply linked to Tencent, while the Shenzhen project has won the bid for Huawei Cloud. Both are top cloud service providers in China, capable of providing long-term and stable revenue.

According to the information disclosed by Century Huatong, the Tencent Yangtze River Delta Artificial Intelligence Advanced Computing Center and Ecological Industry Park project located in Songjiang, Shanghai has delivered nearly 10000 cabinets and gradually put them into operation; The data center project located in Shenzhen is expected to officially enter the operational period of delivering the first batch of cabinets in the second half of 2023 and begin generating operating revenue. The company is expected to have a positive net profit in 2025, which will help the cloud data business enter the business realization period in the coming years.

Of course, another more noteworthy aspect is that with the launch of this round of artificial intelligence revolution, the demand for intelligent computing power in the market is showing explosive growth, and GPU computing power is difficult to obtain. The cloud data center of Century Huatong's advanced layout is obviously expected to be the first to benefit. The company is making a great transformation from IDC basic operation to AI+IDC services. Recently, the subsidiary Century Longteng and Litong Electronics have established a cooperative company to provide AI computing services externally relying on Century Huatong's two Big data centers in Shanghai and Shenzhen.

Shenwan Internet Media believes that the AI technology revolution has begun, and the demand for large model training computing power has rapidly increased. The AI computing power cloud project has built a super computing power cluster to meet the needs of domestic technological development. The project company, Century Litong, plans to invest in Songjiang, Shanghai. After the construction and commissioning of the computing power cluster are completed, revenue will be obtained through leasing computing power.

In the first half of the year, Century Huatong laid a solid foundation for the company's annual performance through its excellent performance in the gaming business. In the second half of the year, with the comprehensive launch of AI computing services, it is expected to bring more surprises to the market.

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