KINGNET(SZ:002517) Huachuang Securities·2024-04-19 00:31Investment Rating - The report gives a "Recommended" rating for the company, with a target price of 14.69 CNY based on a 2024 PE of 18x, corresponding to a target market value of 31.6 billion CNY [1][52][54]. Core Viewpoints - The company is a leading player in the "Legend" and "Miracle" gaming sector, actively expanding into new game categories and leveraging IP to enhance product offerings [1][8]. - The "Legend" gaming market is expected to enter a period of standardized development due to clarified copyright issues, which will help release the value of downstream IP [1][26]. - The company has a solid foundation in the "Legend" and "Miracle" sectors, with a clear second growth curve emerging through IP expansion and new product development [1][9]. - AI capabilities and overseas distribution strategies are opening new growth opportunities for the company [1][49]. Summary by Sections Company Overview - The company started with web games and has evolved into a comprehensive gaming company covering mobile game development, publishing, and distribution, becoming a major player in the "Legend" and "Miracle" sectors [1][13]. - Since its reverse listing in 2015, the company has undergone a cycle of operational and governance changes, returning to a growth trajectory since 2021 [1][13]. Market Analysis - The "Legend" gaming market constitutes about 10% of the domestic gaming market, with a stable scale expected due to the resolution of copyright disputes [1][26][27]. - The market has evolved from single blockbuster products to multiple iterations and derivative categories over the past 20 years [1][27]. Business Model and Growth Strategy - The company has established a full industry chain layout in the "Legend" sector, with a focus on both development and distribution [1][37]. - The company is accelerating its expansion into non-"Legend" categories, focusing on IP-driven product development, particularly targeting the "70/80s" user demographic [1][43]. - The company has a rich pipeline of products scheduled for release in 2024, including titles like "Lin Xian" and "Douluo Dalu: Zhu Xie Chuan Shuo," which are expected to contribute significantly to revenue growth [1][47]. Financial Forecast - The company is projected to achieve revenues of 4.4 billion CNY in 2023, 5.7 billion CNY in 2024, and 6.8 billion CNY in 2025, with year-over-year growth rates of 17%, 31%, and 19% respectively [2][52]. - The net profit is expected to reach 1.5 billion CNY in 2023, 1.8 billion CNY in 2024, and 2.0 billion CNY in 2025, with growth rates of 47%, 16%, and 16% respectively [2][52].