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GameLook report/In the A-share market, the leader with a market value of 100 billion has always been talked about by stock investors, but among the nearly 130 A-share companies with a market value of 100 billion, there are no game companies so far.
Recently, Sanqi Mutual Entertainment, the leader of A-shares, has once again challenged the market value of 100 billion.
On July 4, the A-share listed company Sanqi Mutual Entertainment issued an announcement stating that at the eleventh meeting of the sixth board of directors held on July 3, 2023, the company deliberated and approved the “Adjustment of the upper limit of the share price of the repurchase company”. of the motion”,The upper limit of the repurchase price is adjusted from no more than RMB 22.55 per share to no more than RMB 47 per share, and the scale of repurchase is controlled from 300 million to 600 million yuan. The implementation period is within 12 months from November 2022. The purpose of repurchase For employee stock ownership or equity incentives.
In contrast, Sanqi Mutual Entertainment’s closing price today is 32.3 yuan per share, which means that as long as the stock price of Sanqi Mutual Entertainment rises within 50% in the future, it will fall within the “repurchase range” in Sanqi’s announcement. According to a rough estimate, the latest upper limit of the repurchase price is just right for Sanqi to reach a market value of 100 billion, which shows that Sanqi is very confident in its future performance.
On the evening of July 5th, Sanqi announced again that after the upper limit of the repurchase price was adjusted to 47 yuan per share, it had repurchased at the highest price of 33.22 yuan per share and the lowest price of 32.19 yuan per share on July 5th. Purchased more than 2.1 million shares, and the total transaction amount exceeded 70 million yuan (excluding transaction fees).
It can be seen that Sanqi issued an announcement and paid real money to repurchase very quickly, then new problems emerged, challenging the market value of 100 billion, what is the confidence of Sanqi?
The industry picks up, the boots fall to the ground, and Panax notoginseng revives
First of all, it needs to be pointed out that the market value of 100 billion yuan is not an unachievable goal for Sanqi. In fact, as early as 2020, the stock price of Sanqi reached a peak of 49.26 yuan per share, and the market value once exceeded the 100 billion yuan mark.
In 2020, it was the bonus period of the stay-at-home economy. Working from home and playing games at home brought a large number of new users to the game industry, and the global game industry experienced a surge in revenue. The stock prices of listed game companies around the world generally rose. With the growth, Sanqi’s stock price also skyrocketed.
And the later story is believed to be familiar to everyone. Due to many factors such as the recession of the house economy, the regulation of the total number of domestic version numbers, and changes in the global economic situation, the game industry has gradually ushered in a cold winter since the second half of 2021. A manufacturer that has maintained good performance during this round of game industry correction, but it is still difficult to stop the downward trend of stock price. It was not until the overall recovery of the domestic game industry this year that Sanqi’s stock price rebounded again.
Recently, Sanqi encountered a series of troubles. On June 27, Sanqi issued an announcement stating that Sanqi Mutual Entertainment Company, its actual controller and chairman Li Weiwei, and vice chairman Zeng Kaitian were investigated by the China Securities Regulatory Commission for alleged violations of information disclosure laws and regulations.
However, after the announcement, the stock price of Sanqi did not fall sharply. Instead, it rebounded slightly after a short-term decline. On the whole, the impact of this incident seems to be within a controllable range for the time being.
In terms of the broader market, not long ago, there were riots in France. There were related reports that French President Macron mentioned social media and video games in his speech.
This explanation is obviously too speculative. In GameLook’s view, the real cause of the short-term plunge in the game sector may be the fluctuation of the RMB exchange rate, which triggered the sell-off of foreign capital in the north, and caused the already fragile game stocks to also fall.
But what GameLook needs to point out is that the impact of exchange rate fluctuations on Chinese game companies is actually two-way. If the US dollar-denominated income is converted into RMB for settlement, affected by the depreciation of the RMB exchange rate, the overseas income of game companies denominated in RMB will increase after the actual foreign exchange settlement. For foreign funds, nothing is better than nothing. Of course, whether exchange rate fluctuations are good or bad, it may not be possible to draw a conclusion for the time being.
Chinese games are going overseas, and top overseas publishers are scarce. Sanqi will hit the world with multiple products
Of course, for Sanqi to achieve and stabilize its market value of 100 billion yuan, it is definitely not enough to rely on storytelling alone. In the long run, it still needs stable and outstanding performance to support it, especially for such a leading company in the A-share game sector.
Judging from the financial reports of Sanqi in recent years, its performance is remarkable, and the reason why it has sufficient confidence in the future, GameLook seems to be inseparable from the development direction and strategy of Sanqi in recent years.
First of all, compared with traditional domestic game giants, such as Tencent and Netease, although Sanqi also has self-developed products, the actual game distribution business accounts for a relatively high proportion. From the perspective of industry regulation, in the Chinese market, Sanqi’s self-developed game projects will be affected by the regulation of the total number of licenses, but Sanqi’s domestic agency distribution business depends on the total number of licenses approved by the entire industry.
Therefore, in theory, with the normalization of version number approval, Sanqi, as a publisher, obviously benefits more than pure developers. It has the opportunity to obtain more games with version numbers to enrich its product line. For example, “The Last Primitive”, which was released by Sanqi not long ago and developed by Shiyue, has achieved very good results, with a turnover of about 100 million in the first month.
More importantly, Sanqi’s distribution scope is not only domestic, but it is also a global game publisher, and its achievements in overseas markets are quite outstanding. Sanqi’s 2022 annual report shows that overseas revenue has increased by 25.47% year-on-year, and overseas revenue has accounted for 36.54%.
In recent years, many game manufacturers have embarked on overseas journeys. From GameLook’s point of view, domestic developers’ demand for overseas distribution continues to rise. Looking at the entire industry, there are not many mature overseas publishers, and those with global distribution capabilities Publishers are even more numerous.
Domestic top publishers like Sanqi that can succeed in T1 markets in Europe, America, and Asia are even rarer. For example, products such as “Puzzles & Survival” and “Song of the Cloud City” issued by Sanqi are sold in Europe, America, Japan, Korea, etc. All achieved remarkable results.
In contrast, the same game goes overseas. For the two giants Tencent and NetEase, they have their own thinking and strategies for products released overseas.
For example, Tencent is currently very focused on the global distribution of 3D next-generation, FPS, PC and console game IP adaptation games, while NetEase relies more on self-developed games to go overseas. Many domestic games are at odds with Tencent and NetEase. There are many companies integrating research and development in the company, and few are engaged in agency distribution business, which leads to the lack of agents for domestic developers who are still in the growth stage when they release games overseas, while Sanqi is competent for some non-Tencent-standard overseas games in terms of distribution. The product has not only enriched the Sanqi product line, helped domestic R&D companies achieve overseas revenues of over 100 million, but also brought more room for imagination to the globalization of Sanqi.
Judging from the current public information, the number of Panax notoginseng products has reached 33. In addition to the “Mortal Cultivation: The Human World”, which has just performed very well in the domestic market, and the “Last Primitive” mentioned above, According to the public information collected by GameLook, Sanqi also reserves in overseas markets such as Match 3 + game “Emilys Resort”, palace simulation management game “Yes Your Highness”, civilized SLG “Era of Glory”, Match 3 + SLG “Puzzles & Chaos: Frozen Castle”, female-oriented MMO “Swinging a Dream”, magic MMO “The Lost Gate: Prologue”, and SLG “Legend of the Wild: Ten Thousand Years Before History”, etc., rich and diversified products are also for the future of Sanqi Growth provides ample impetus.
Of course, it must be pointed out that since Panax notoginseng often adopts the mode of buying and issuing volume, the cashing period of profits often lags behind, ranging from one quarter to half a year. If this rule is followed, in the second half of this year or next year Sanqi’s financial report may bring surprises. It remains to be seen whether Sanqi Mutual Entertainment can break through the market value of 100 billion again.
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