In the first half of the year, Shenzhen TaiYue, which surpassed Perfect World and for the first time entered the top three A-share game stocks, released its third-quarter report.

In the third quarter, Shenzhen TaiYue's operating income was 1.461 billion yuan, a year-on-year increase of 4.53%, and the net profit attributable to the parent company was 463 million yuan, a year-on-year increase of 191.43%!

In the first three quarters, Shenzhen TaiYue's cumulative revenue reached about 4.514 billion yuan, a year-on-year increase of 11.42%, and the net profit attributable to the parent company was about 1.094 billion yuan, a significant year-on-year increase of 94.33%, a figure that even exceeded the company's total net profit for the whole year of 2023.

Looking at the performance in the capital market, Shenzhen TaiYue's stock price has risen by more than 55% year-to-date.

It is worth noting that Shenzhen TaiYue's sales expenses in the first three quarters decreased by 31.34% year-on-year, and the sales expense ratio dropped to 17%.

How did Shenzhen TaiYue achieve double growth in operating income and net profit while reducing sales expenses?

I. Q3 financial report breakdown: Net profit exceeds last year's total, sales expenses decline by more than 30%

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Shenzhen TaiYue's latest financial report shows that in the third quarter of 2024, the company achieved an operating income of 1.461 billion yuan, a year-on-year increase of 4.53%, and the net profit attributable to shareholders of the listed company reached 463 million yuan, a significant year-on-year increase of 191.43%.

If we look at the first three quarters, Shenzhen TaiYue's total operating income is about 4.514 billion yuan, a year-on-year increase of 11.42%, and the net profit attributable to the parent company's shareholders is about 1.094 billion yuan, a significant year-on-year increase of 94.33%, a figure that has already exceeded the total net profit for the whole year of 2023.

According to the global revenue ranking of Chinese mobile game publishers released by Sensor Tower (including global AppStore + Google Play), Kemu Games, a subsidiary of Shenzhen TaiYue, performed steadily, basically ranking in the top ten, just behind companies such as Tencent, NetEase, miHoYo, DianDian Interactive, 37, and Lilith.At present, the flagship products of Shenzhen Taiyue remain "Age of Origins" and "War and Order," with both products having been online for more than 5 and 8 years, respectively.

From a product perspective, according to the Sensor Tower's ranking of the top 30 overseas revenue earners for Chinese mobile games from January to September 2024, "Age of Origins" has essentially maintained a position within the top ten, while "War and Order" has also steadily held a place within the top 30.

On the cost side, this year has seen a significant decrease in Shenzhen Taiyue's sales expenses, while administrative and research and development expenses have increased.

Specifically, for the first three quarters, Shenzhen Taiyue's accumulated sales expenses were approximately 763 million yuan, a year-on-year decrease of 31.34%, mainly due to a reduction in promotion costs; accumulated administrative expenses were about 855 million yuan, a year-on-year increase of 46.14%, primarily due to an increase in employee compensation.

Furthermore, Shenzhen Taiyue's investment in research and development has also shown an upward trend, with accumulated R&D expenses for the first three quarters being about 271 million yuan, a year-on-year increase of 10%.

For the first three quarters, Shenzhen Taiyue's sales expense ratio was only 17%, which is at a relatively low level in the industry. During the same period, Gibit's sales expense ratio was 28%, and Kaiying Network's was 35%.

Game Finance Convergence believes that the significant reduction in Shenzhen Taiyue's sales expenses can be attributed to the following two key factors:

First, fewer new product launches: Shenzhen Taiyue has hardly introduced any new gaming products in 2024. The company's core gaming products, such as "Age of Origins" and "War and Order," are all established games that have been operating stably. These games have established a certain brand influence and loyal player base in the market, hence there is no need for large-scale market deployment to attract new users.

Second, optimization of market promotion strategies: Shenzhen Taiyue may have adopted more precise or cost-effective promotion strategies, or the company may have focused more on attracting users through the quality and reputation of the products themselves, rather than relying solely on large-scale market deployment.

According to the semi-annual report, "Age of Origins" saw a year-on-year increase in revenue of 21.43% in the first half of the year, while marketing expenses decreased by 24.26%. "War and Order" experienced a slight decrease in revenue, but marketing expenses also decreased by 15.21%.Overall, Shenzhou Taiyue has performed exceptionally well this year, achieving double growth in both operating income and net profit despite a reduction in sales expenses, making it a dark horse in the gaming industry. In the first half of this year, Shenzhou Taiyue surpassed Perfect World and for the first time entered the top three of A-share gaming stocks.

II. Overview of Advertising Placement: Increased Overseas Advertising, Reduced Domestic Purchase Volume

1. Overseas Market

Currently, the majority of Shenzhou Taiyue's revenue comes from the overseas market. According to the company's semi-annual report, overseas revenue accounted for over 80% in the first half of the year.

Based on DataEye-ADX Overseas Edition, as of October 28th, the number of materials Shenzhou Taiyue has placed in the overseas market reached 8,917 sets, a figure that has already surpassed the total volume of placements for the entire previous year.

However, compared to Yotta and Lilith, who are deeply involved in the SLG (Strategy Layered Game) track, Shenzhou Taiyue's overseas market placement volume is not particularly prominent.

During the same period, Yotta's cumulative placements exceeded 44,000 sets, while Lilith's exceeded 34,000 sets.

From a product perspective, according to DataEye-ADX Overseas Edition, "Age of Origins" and "War and Order" have placed 4,650 and 2,532 sets of materials respectively since the beginning of the year. The average daily placement volume for both games is between 400-600 sets, with "Age of Origins" reaching a peak single-day placement of 782 sets, while "War and Order" only reached 613 sets.

Compared to other SLG products going overseas, the placement efforts for Shenzhou Taiyue's two products are not significant. In the same period, Yotta's "The Grand Mafia" placed more than 22,000 sets of materials, Diandian Interactive's "Frost Apocalypse" placed over 18,000 sets, and Sanqi's "Puzzles & Survival" placed over 15,000 sets.

Despite Shenzhou Taiyue's relatively conservative placement efforts in the overseas market, according to Sensor Tower's data, its flagship product "Age of Origins" ranks among the top Chinese SLG products going overseas.2. Domestic Market

In the domestic market, Shenzhen Taiyue is quietly adjusting its advertising strategy.

According to data from DataEye-ADX's domestic version, Beijing KeMu Software Co., Ltd., a subsidiary of Shenzhen Taiyue, has launched approximately 11,000 sets of materials this year, a 55% year-on-year decline, significantly lower than the 31,500 sets launched throughout last year.

Shenzhen Taiyue primarily invests in the domestic market with the game "Rising Sun City," which accounts for more than 90% of the company's total material volume.

However, the company has significantly reduced its advertising volume for "Rising Sun City" this year, stopped advertising for the new game "Endless Sky," which was launched last year, and maintained the same advertising volume for "War and Order" as last year.

Looking at product rankings, data from DianDian shows that over the past year, both "Rising Sun City" and "War and Order" have experienced a downward trend in their rankings on the domestic iOS game bestseller charts.

Currently, "Rising Sun City" has dropped to over 80th place on the domestic iOS strategy game bestseller chart and has fallen out of the domestic iOS game bestseller chart. "War and Order" once ranked around 100th on the domestic iOS strategy game chart, but due to app chart cleaning, its specific ranking is currently not visible.

From this, it is not difficult to understand why Shenzhen Taiyue has chosen to focus its strategic efforts on overseas markets and correspondingly reduce its advertising volume in the domestic market.