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with its market value falling by 90%, why is zhongxu future (09890.hk) no longer a “legend”?

since the beginning of this year, the share price of zhongxu future has continued to fluctuate greatly - it can fall by 76.4% in one day, and can quickly "recover" in a short period of time, which can be called a "demon stock". looking back at its trend, since january, zhongxu future's share price has continued to rise, once rising to a high of hk$72.45 per share; in february, zhongxu future's share price experienced a huge shock, falling 76.4% to hk$16.66 per share on february 2, and after a short-term adjustment, it quickly rose to nearly hk$60 per share on february 28; after that, zhongxu future's share price continued to fall, falling into a situation of repeatedly setting new lows.

as of the close of hong kong stocks on september 13, zhongxu future's share price fell to hk$6.10 per share, down 91.58% from its highest price of hk$72.45 per share in january this year, and its market value was only about hk$3.3 billion. in january this year, zhongxu future's market value once exceeded hk$38 billion, which means that zhongxu future's market value has evaporated by more than 90% this year.

△image source: wind

zhongxu future mainly operates the online game distribution business through the tanwan game brand. as of june 30, 2024, it has operated more than 380 game products and was successfully listed on the hong kong stock exchange on september 28, 2023.

it is worth noting that on august 30, 2024, zhongxu future released its 2024 interim results, with revenue of 3.226 billion yuan in the first half of the year, a year-on-year decrease of 5.13%; the loss attributable to shareholders was 383 million yuan, compared with a profit of 276 million yuan attributable to shareholders in the same period last year, turning from profit to loss year-on-year.

in response, zhongxu future stated in its performance forecast on august 23 that the losses were related to increased sales and distribution expenses, asset impairment losses, and increased investment losses on the company's financial assets.

market capitalization is a barometer of a listed company, reflecting not only the company's strength and scale in the capital market, but also investors' confidence and expectations in the company. regarding the company's business and future development plans, the times weekly reporter sent an interview outline to zhongxu future, but no response was received as of press time.

△source: zhongxu future official website

in the first half of the year, the company increased its revenue by operating two new games

the 2024 semi-annual report shows that zhongxu future's revenue mainly comes from online games, online literary products and short videos, as well as consumer products. among them, the game business is zhongxu future's main source of profit, with its game product revenue reaching 3.15 billion yuan, accounting for 97.64% of the total revenue in the first half of the year.

in terms of gross profit margin, zhongxu future's gross profit margin was as high as 73.3% in the first half of this year, an increase of 5.8 percentage points year-on-year. this is mainly due to the high proportion of revenue generated by game products under the company's self-operated model and the high gross profit margin.

zhongxu future revealed that it has launched 29 new games in the first half of this year. among them, "douluo continent: shrek academy" and "beast lords: new world" were well received by players and brought significant profits. the revenue generated by the game products marketed and operated by the company under the self-operated model increased by 17.1% year-on-year to 2.482 billion yuan.

according to reports, "douluo dalu: shrek academy" is a large-scale multiplayer online mobile game with a large world team battle jointly released by zhongxu future and zhongyou mobile games (00302.hk). it was on the app store's free list on the first day of its launch; "beast lords: new world" is a heavyweight mobile network strategy (slg) game launched by zhongxu future. it topped the ios free list and other lists as soon as it went online.

diandian data shows that since its launch on january 30, the app store revenue of "douluo dalu: shrek academy" has steadily declined; as of june 30, the app store revenue of "douluo dalu: shrek academy" has accumulated to us$12.4564 million, equivalent to rmb 88.5648 million.

△image source: diandian data

beast lords: new world was launched on june 5. according to diandian data, as of june 30, the app store revenue of beast lords: new world totaled $3.5775 million, or about rmb 25.4363 million. the app store revenue of douluo continent: shrek academy and beast lords: new world totaled about rmb 114 million in the first half of this year.

△image source: diandian data

zhongxu future stated that the company is actively preparing for a number of new blockbuster games, covering different themes and types. among them, "little soldiers' big war" has started public beta, and "wandering for five thousand years" and the big ip strategy game "douluo continent: the legend of zhuxie" have opened reservations.

founder steps down as ceo

however, with the launch of many new games, zhongxu will still face pressure in publicity and promotion in the future.

according to the 2024 semi-annual report, zhongxu future's sales and distribution expenses reached 2.289 billion yuan, accounting for 70.95% of total revenue, close to the company's gross profit margin; an increase of 17.2% compared with 1.953 billion yuan in the same period of 2023. zhongxu future said that this was mainly due to increased promotion and advertising of new high-quality games.

the times weekly reporter noted that sales and distribution expenses have always been the largest expenditure for zhongxu future. from 2020 to 2023, zhongxu future's sales and distribution expenses will be 1.917 billion yuan, 3.851 billion yuan, 5.622 billion yuan, and 3.88 billion yuan, respectively, accounting for 66.7%, 67.1%, 63.8%, and 59.55% of its revenue, respectively.

in comparison, zhongxu future's r&d expenditure is not large. from 2020 to 2023 and the first half of 2024, zhongxu future's r&d costs were 472 million yuan, 137 million yuan, 158 million yuan, 171 million yuan and 74.455 million yuan, accounting for 16.4%, 2.4%, 1.8%, 2.62% and 2.29% of its revenue, respectively.

zhongxu future admits that the gaming industry is facing great pressure due to factors such as the slowdown of the overall macroeconomic situation, the gradual reduction of the growth dividend of game users, and the intensifying competition pattern of existing stocks. the company will actively plan its growth strategy and business.

in addition, along with the disclosure of the semi-annual report, zhongxu future made the decision to change its chief executive officer.

on august 30, 2024, zhongxu future announced that liang wenhong will replace wu xubo as the company's ceo, effective immediately. after this change, wu xubo will continue to serve as the company's executive director, chairman of the board, chairman of the nomination committee and member of the remuneration committee.

according to the 2023 annual report, wu xubo graduated from the jiangxi judicial police vocational college in china with a college diploma in judicial police and has more than 17 years of experience in the internet technology industry. from december 2008 to january 2015, he worked at guangzhou weidong network technology co., ltd., and his last position was marketing director, responsible for overall marketing affairs. he co-founded the 91wan web game platform. later, he founded jiangxi tanwan in 2015 and served as chairman and director.

the announcement shows that liang wenhong graduated from jinan university with a bachelor's degree in tourism management and has more than 11 years of experience in the internet technology industry. he has served as marketing director of jiangxi tanwan information technology co., ltd., responsible for mobile game advertising business, general manager of hainan tanwan information technology co., ltd., responsible for game distribution business, and vice president of zhongxu future, responsible for multi-category product development and overseas game distribution business.

zhongxu future stated that the company will continue to deepen the development of the game industry, commit to the development and operation of games, and gradually transform from a game developer to an integrated game research and operation company; in terms of business, the company will continue to expand overseas business, develop diversified game categories, and create an "ai+game" industry layout.