FRIENDTIMES INC.(6820.HK)：EYE ON UPCOMING LAUNCH OF TWIST OF THE FATE

机构：招银国际
研究员：Sophie Huang/Eason Xu

　　We hosted a three-day NDR for FriendTimes (FT), during which its mgmt. showed more confidence in the upcoming launch of Twist of the Fate (ToF, 浮生忆玲珑), diversified pipeline and mini-games potential in FY24-25E. We suggest to move beyond soft 2H23E, and eye on the launch of ToF (estimated on 2 Jan 2024).
　　With better testing feedback and differentiated marketing, we see high visibility for ToF to contribute annual grossing of RMB1.2bn and profit of RMB200mn in FY24E, backed by innovative cooperation with popular female-oriented dramas and films, as well as offline campaigns. Its diversified genre (e.g. Code: WX, Code: PE), mini games and overseas expansion would bring further upside. To factor in higher visibility for ToF, we raised FY24/25E rev by 45%/44%, and NPM by +9.6/0.9ppts. Our DCF-based TP was lifted to HK$2.0.
　　Eye on the launch of ToF, with differentiated marketing. We expect Twistof the Fate to be launched on 2 Jan 2024, followed by overseas versions (e.g.
　　SEA, Chinese Taiwan, South Korea), to boost FY24E rebound. ToF has launched multiple rounds of tests, and received better user feedback and paying metrics than ToF 1 (Fate of the Empress). Backed by the success of ToF1, we see high visibility for ToF to contribute peak monthly grossing of RMB150mn and annual net profit of RMB200mn in FY24E, with: 1) multi-channel marketing, including inviting ambassadors (famous for costume drama) for product promotion, livestreaming and NPC engagement; and 2) innovative cooperation with popular female-oriented dramas and films, as well as offline campaigns (e.g. Suzhou-style afternoon tea). ToF may see rising grossing in 1H24E, and may generate meaningful profit in 2H24E.
　　Diversified genre, mini games and overseas expansion to bring furtherupside. FT will test the water for martial arts game (e.g. Code: WX) and European royalty type (Code: PE) in FY24E. Code: PE will enter into two rounds of tests in overseas market in 1H24E, and target to launch in 2H24E.
　　Given the wide popularity of King’s choice (similar to PE), we expect PE to boost overseas grossing if executed well. Code: WX will be launched in 2H24E/2025E, targeting male players with traditional wu xia style. Moreover, FT will convert multiple key titles to mini-games, unlocking grossing potential. n Looking beyond soft FY23E. We suggest investors to move beyond 2H23E for the lack of new launches. We forecast 2H23E rev -34% YoY, and bottom line at -RMB49mn, with S&M scaling back of A story of Lala. To factor in higher visibility for ToF, we raised our topline forecast by 45%/44% in FY24/25E, with bottom line at RMB250mn in FY24E. Our TP was lifted to HK$2.0.