Yum Cha 飲 茶

13 Pages·2017·2.61 MB·English

Yum Cha 飲 茶
April 20, 2018
RESEARCH NOTES
INDICES Closing DoD% WUXI BIOLOGICS [2269.HK; HK$76.20; NOT RATED] - Wuxi Biologics (WX) is
one of the largest vertically integrated contract development and manufacturing or-
Hang Seng Index 30708.4 1.4 ganizations (CDMO) in China with >60% market share. The market is expecting a
HSCEI 12239.8 2.1 68%-74% EPS CAGR in 2017-2020E. We believe the fast growth will be driven by 1)
favourable biologic industry policies; 2) WX’s intended capacity expansion (30,000L
Shanghai COMP 3117.4 0.8
commenced at end-2017 in Wuxi; 7,000L in its clinical manufacturing facility in
Shenzhen COMP 1814.6 0.6 Shanghai is on track to be operational by April 2018, more than double its existing
Gold 1345.0 (0.3) clinical manufacturing capacity; it initiated design and construction of 4 cGMP manu-
facturing facilities in Wuxi city in 2018; and its rapid expansion will enable US$900m
BDIY 1124.0 6.8
in peak manufacturing revenue); 3) management expectations of securing 40-50
Crude Oil, WTI(US$/BBL) 68.4 0.1 more new contracts a year in 2018/19; 4) a sharp increase in the upcoming millstone
Crude Oil, BRENT(US$/BBL) 73.8 0.4 backlog (Figure 6); and 5) more partnerships with bio firms and commercialized
CMOs business expected to start contributing revenue in 2020. After the recent mar-
HIBOR, 3-M 1.3 1.2
ket correction, WX is trading at 254/128/74/50x 2017/18/19/20E Bloomberg consen-
SHIBOR, 3-M 4.1 (1.3) sus PER, which is not excessive from a PEG perspective, as it is ~1x PEG. Given 1)
WX’s effective operations and proven advanced biologics R&D technologies; 2)
RMB/USD 6.3 0.1
WX’s cGMP having met FDA standards, which deserves a valuation premium; 3) the
scarcity of CDMO targets in the H-share market; and 4) upside for consensus earn-
DATA RELEASES DUE THIS WEEK ings if WX can secure more contracts than expected, push the project pipeline pro-
Source: Bloomberg gression faster than expected (Figure 2), or realize order backlog revenue more ef-
fectively (Figure 6), we believe the recent correction to ~1x PEG provides an entry
point for long-term investors interested in capturing growth opportunities in China
fast-growing biologics industry.
TMT UPDATE: SEMICONDUCTOR - Shares of HK-listed China semi supply chain
companies, including IC design (CE Huada [0085.HK], Solomon Systech [2878.HK],
Shanghai Fudan [1385.HK]) and foundries (SMIC [0981.HK], Hua Hong [1347.HK]
and ASMC [3355.HK]) performed well in past two days. Their share prices rallied
because the market is expecting the China semi supply chain to benefit from locali-
zation after the US government reactivated the export ban on ZTE [0763.HK] on 16
Apr 2018. We hold a constructive view on China’s semi industry, but consider it too
ambitious to expect China’s semi supply chain to grow by leaps and bounds to re-
place or even exceed overseas names in a short period of time. We suggest inves-
tors calm down and wait for better entry point instead of chasing the current rally,
especially since the market is now very sensitive to macro news flow.
TMT UPDATE: LIVE STREAMING PLATFORM - Since we provided an overview of
the online video industry and an introduction of the top three online video platforms
in China in our previous reports, we believe it is time to talk about some of the niche
players, like live streaming platforms in China’s online video industry. Live streaming
is one of the major segments in the online video industry, and it has gained a lot of
attention during the past few years. As Inke Limited and Huya Inc. [HUYA.US] have
both filed IPO applications, in Hong Kong and the U.S., respectively, and Douyu in-
tends to go public, we believe live streaming platforms will continue to gain market
attention. We believe online video will be the key focus in the online entertainment
industry and the TMT non-hardware segment in 2018. Currently, Tencent [0700.HK],
Alibaba [BABA.US] and Baidu [BIDU.US] are the three leading platforms in the
online video market in China. We believe smart TV makers like Skyworth [751.HK]
and TCL Multimedia [1070.HK] will benefit from the growth of the online video indus-
try. The IPO of Inke and Huya may attract market attention to live streaming plat-
forms (most of which are listed in the US, such as MoMo [MOMO.US] and Weibo
[WB.US]), and related companies, such as Tiange [1980.HK] and Meitu [1357.HK].
1
SNIPPETS
CHINA TMT HARDWARE: HANDSETS – TSMC released guidance for turnover in Q2 2018 yesterday between US$7.8b
and US$7.9bn, which is lower than market consensus of US$8.8bn. The expected gross profit margin for Q2 2018 is 47%-
49%, down from 50.3% in Q1 2018. According to TSMC management, continued weak demand for the Company’s mobile
sector will negatively impact its business in Q2 2018 despite stronger cryptocurrency mining. Since Apple is TSMC’s major
customer of the Company’s mobile division, the market is speculating that TMSC’s lower-than-expected Q2 2018 turnover
guidance is a result of weaker-than-expected demand from Apple. As discussed in our sector update released on 16 Apr
2018, we now hold the view that the Android camp will outperform the Apple camp in the short term, given new product
launches by Chinese Android manufacturers, and that the increase in sell-in will support shipment growth for Sunny Optical
[2382.HK] and Q-Tech [1478.HK] in Apr and May 2018. The market is somewhat cautious on AAC [2018.HK], given its high
exposure to Apple. The major catalyst for AAC is its Q1 2018 results. Solid Q1 2018 results will help remove market con-
cern about the growth outlook for AAC. We also believe that news flow on the ramp-up of new iPhone models will emerge
in late Q2 2018, which may boost sentiment on Apple’s suppliers including AAC and FIT Hong Teng [6088.HK].
CHINA TMT NON-HARDWARE: ONLINE GAMES - Yesterday, China’s Ministry of Culture and Tourism released an im-
portant message for the upcoming “Online Card and Board Game Management” policy, requiring each platform to immedi-
ately stop distributing Texas-type games and completely terminate the operation of Texas-type games by 01 Jun 2018.
Based on the available information, the Texas-type games referred to are the online card and board games which are auto-
matically decided by the systems according to the probabilistic distribution method, such as Texas Hold'em, Dou dizhu, slot
machine, and Show Hand. Also, China’s Ministry of Culture and Tourism clarified that users are not allowed to directly par-
ticipate in game matches with legal currency or any type of virtual currency. We believe this announcement will have a
large negative impact on some of China’s online card and board game companies, as Texas Hold'em is one of most popu-
lar card games, accounting for about 20% of China’s total card and board game market. We believe the impact will be
greater on Boyaa [0434.HK] and Ourgame [6899.HK] than on other online game platforms because in 2017, Texas
Hold’em accounted about 72% of Boyaa’s total revenue and approximately 37% of Ourgame’s total revenue.
Market size of online card and board games
Market Size YoY growth
RMB bn
12 50%
45%
10
40%
35%
8
30%
6 25%
20%
4
15%
10%
2
5%
0 0%
2014 2015 2016 2017E 2018E
Source: Sootooinstitute, CGIS Research
2
April 20, 2018
COMPANY / INDUSTRY NEWS

Wuxi Biologics [2269.HK, HK$76.2, NOT RATED] – Long-term entry opportunity after correction
Analysts: Harry He ([email protected]; Tel: [phone]);
Wong Chi Man, CFA ([email protected]; Tel: [phone]);
Summary: Wuxi Biologics (WX) is one of the largest vertically integrated (HK$) (HK$ million)
107 7000
contract development and manufacturing organizations (CDMO) in China
with >60% market share. The market is expecting a 68%-74% EPS CAGR 87 6000
in 2017-2020E. We believe the fast growth will be driven by 1) favourable 5000
biologic industry policies; 2) WX’s intended capacity expansion (30,000L 67 4000
commenced at end-2017 in Wuxi; 7,000L in its clinical manufacturing facili-
47 3000
ty in Shanghai is on track to be operational by April 2018, more than dou-
2000
ble its existing clinical manufacturing capacity; it initiated design and con- 27
struction of 4 cGMP manufacturing facilities in Wuxi city in 2018; and its 1000
rapid expansion will enable US$900m in peak manufacturing revenue); 3) 7 0
management expectations of securing 40-50 more new contracts a year in 12/6/2017 12/12/2017
2018/19; 4) a sharp increase in the upcoming millstone backlog (Figure 6); Turnover (RHS) Price (LHS)
and 5) more partnerships with bio firms and commercialized CMOs busi- Market Cap: US$11,877m; Free Float: 31.7%
ness expected to start contributing revenue in 2020. After the recent mar- 2016A 2017A 2018E 2019E 2020E
ket correction, WX is trading at 254/128/74/50x 2017/18/19/20E Bloom- Revenue (RMBm) 989 1,619 2,504 4,082 5,643
berg consensus PER, which is not excessive from a PEG perspective, as Operating profit (RMBm) 230 430 649 1,124 1,798
it is ~1x PEG. Given 1) WX’s effective operations and proven advanced Net profit (RMBm) 141 253 627 1,089 1,552
biologics R&D technologies; 2) WX’s cGMP having met FDA standards, YoY % 217% 79% 148% 74% 43%
which deserves a valuation premium; 3) the scarcity of CDMO targets in Net margin 14.3% 15.6% 25.0% 26.7% 27.5%
the H-share market; and 4) upside for consensus earnings if WX can se- EPS(RMB) n.a 0.240 0.478 0.822 1.213
cure more contracts than expected, push the project pipeline progression YoY % n.a 24.0% 99.2% 72.0% 47.6%
faster than expected (Figure 2), or realize order backlog revenue more
effectively (Figure 6), we believe the recent correction to ~1x PEG pro- ROE (%) n.a 11.8 12.3 16.1 16.2
vides an entry point for long-term investors interested in capturing growth Dividend yield (%) n.a 0.0 0.0 0.0 0.0
PER (x) n.a 254 128 74 50
opportunities in China fast-growing biologics industry.
PBR (x) n.a 17.6 12.1 10.6 8.9
Company: WX is a vertically integrated contract development and manu- Source: Bloomberg
facturing organization (CDMO) in China (Figure 1&5). The company had a
63.5% market share of China’s biologics outsourcing services market and
2.4% in the global biologics outsourcing services market in terms of reve- Valuation: There is no direct comparison to WX in the H-share mar-
nue in 2017 (Figure 5). Management holds a 63.46% interest. WX was ket. The market’s shorter horizon EPS forecasts for 2017-2019E
listed on the HK Exchange in June 2017. CAGR varies widely, ranging from 68% to 100% (excluding one ex-
ceptionally low outlier), while in the relative medium term of 2017-
Business model: WX follows a “Follow-the-Molecule” Integrated Solution
2020E, the EPS CAGR fluctuation tends to narrow, ranging from 68%
Model, whereby customer demand for its services increases as its biolog-
to 74%. Our view is that in the near term due to high uncertainty relat-
ics advance through development and ultimately to commercialization,
ed to biologics R&D, WX’s earnings can be affected by many factors,
which allows revenue from each project to grow geometrically as the pro-
such as new contracted customers’ upfront fees and milestone fees
ject advances through the biologics development cycle. WX’s revenue
associated with the progression of early stage projects to later stag-
comes from three sources (Figure 4): 1) service fees (for discovery, devel-
es. The main growth driver for strong 2018 growth is expected to be
opment or manufacturing); 2) milestone fees (for each pre-set milestone
milestone fees from project progression and new contract services
reached, such as reaching a clinical endpoint or a successful regulatory
fees. In the medium to longer term, we expect to see a reduction in its
filing); and 3) royalty fee (which can be up to 8% of net sales for 5-15
earnings fluctuations, with gradual convergence with the China bio-
years, if a product is successfully commercialized). As of end-2017 WX
logics industry growth rate of ~35% (China’s biologics market is ex-
had a solid order backlog (Figure 6), securing its future growth.
pected to grow at a CAGR of 34.8% in 2016-2021, reaching
Manageable risks: Most of WX’s revenue is generated in USD, while RMB9.2bn in 2021). Also, in the medium to long term, more and more
costs are settled in RMB, so the recent RMB appreciation will harm mar- stable commercialized CMOs revenue will help mitigate WX earnings’
gins. WX started to enter into forward contacts to mitigate exchange risks. fluctuations. In summary, we think the current ~1x PEG valuation is
Although 55% of WX’s revenue in 2017 was from the U.S., we believe a not excessive, given 1) WX’s efficient operations (~4 weeks from
potential trade war will have a limited impact on WX, as it is responsible contract signing to CRO commencement vs. the industry average of
only for CDMOs, not marketing and commercializing drugs. 16-24 weeks) and proven biologics R&D technology; 2) WX’s cGMP
Opportunities from MAH: The marketing authorization holder (MAH) meeting FDA standards, which deserves a valuation premium; 3) the
allows biotech companies based in China to focus on R&D and to out- scarcity of CDMOs targets in the H-share market; and 4) the potential
source manufacturing to third-party CROs, offering great opportunities for upside to earnings, given WX’s proved contract lock historical track
WX, given its leading position in China’s biologics outsourcing services record and plentiful order backlog. Therefore, we suggest long-term
market. investors interested in capturing growth opportunities in China’s fast-
growing biologics market build positions at recent market correction
Healthy financial position and capex: WX has zero debt and net cash levels.
of >RMB2bn post-IPO of >HK$3bn in mid-2017. We expect this financial
position, together with expected >RMB800m in operating cash flow each Risks: Intensified CDMOs competition, failure of projections, slower-
year, to be more than sufficient to support its expected ~RMB1bn capex/ than-expected development progression, and RMB appreciation.
year in capacity expansion in the next 2-3 years.
April 20, 2018
Figure 1: Business model of WX

Source: Company
Figure 2: Phases of WX projects
Source: Company
April 20, 2018
Figure 3: WX factory locations
Source: Company
Figure 4: Revenue sources
Source: Company
Figure 5: CDMO market share
Source: Company
April 20, 2018
Figure 6: Order backlog
Source: Company
Source:
April 20, 2018
COMPANY / INDUSTRY NEWS
TMT INDUSTRY UPDATE – Live streaming platforms regain market attention
Analyst: Mark Po, CFA; Tel: [phone]; [email protected]; Mark JiangTel:(852)3698 6321; [email protected]
Since we provided an overview of the online video industry and an introduction of the top three online video platforms in China in our previous re-
ports, we believe it is time to talk about some of the niche players, like live streaming platforms in China’s online video industry. Live streaming is one
of the major segments in the online video industry, and it has gained a lot of attention during the past few years. As Inke Limited and Huya Inc.
[HUYA.US] have both filed IPO applications, in Hong Kong and the U.S., respectively, and Douyu intends to go public, we believe live streaming plat-
forms will continue to gain market attention, and we maintain the view that as a clearer business model has developed, online video will be the next
major growth driver for the online entertainment industry. Also, we provide a summary of the live streaming market and the business model of Inke
and Huya.
Live streaming market in China: There are two major stages in the development of social media communities in China: a) the text and picture
stage, such as instant message apps and blogs; and b) video-based platforms, which allow users to interact via videos but lack real-time interaction.
Live streaming, the new form of social media communities, enables users to have real-time interaction with each other. On live streaming platforms,
users are connected primarily through video, voice and text, and can participate in real-time in a broad range of interactions, including online games,
talent shows and outdoor activities. Also, users can create their own videos to share with other users on live streaming platforms. Currently, China is
the world’s largest live streaming market, with average MAU of 297m in 2017; this is expected to grow to 518m in 2022 at a CAGR of 24.6%. Also,
China’s live streaming market size was US$5.5bn in 2017 and is expected to reach RMB16.5bn in 2022. In general, there are two main ways for live
streaming platforms to monetize: a) live streaming content; it is free to view, but users can tip broadcasters with virtual items, and sales of these virtu-
al items are currently the largest revenue source of live streaming platforms; and b) revenue from online advertising, which accounts for a relatively
small portion of the revenue of most live streaming platforms.

Figure 1： Market size of live streaming market in China Figure 2:MAU of mobile live streaming market in China
US$b Non-ganme live streaming Game live streamnig
20 m MAU Peneration rate of mobile Internet user
600 60%
18 CAGR: 132.7%
16 500 50%
14
400 40%
12
10
300 30%
8
6 200 20%
4
100 10%
2
0 0 0%
2015 2016 2017 2018E 2019E 2020E 2021E 2022E 2012 2013 2014 2015 2016 2017 2018E 2019E 2020E 2021E 2022E
Source: Frost & Sullivan, CGIS Research Source: Frost & Sullivan, CGIS Research
The live streaming market can be grouped into several segments, including the mobile live streaming market and the game live streaming market. On
mobile live streaming platforms, broadcasters and viewers can be connected on a real-time basis via mobile devices. The monthly active user base of
mobile live streaming platforms in China increased from 5.6m in 2012 to 176m in 2017 and is expected to reach 501.3m in 2022. Also, the market
size of mobile live streaming in China has experienced rapid growth, up from RMB105.7m in 2012 to RMB25.7bn in 2017 at a CAGR of 200% and is
expected to further increase to RMB97.8bn in 2022. According to Frost & Sullivan, the major revenue source for mobile live streaming platforms in
China is from the sale of virtual items to paying users; this accounts for more than 83% of the total revenue of such platforms. The second major rev-
enue source is online advertising; according to Frost & Sullivan, China’s online mobile advertising market increased from RMB5bn in 2012 to
RMB168.9bn in 2017 and is expected to reach RMB589.3bn in 2022. Other monetization strategies, like e-commerce and social games, are also
expected to be developed. Currently, the growth of the mobile live streaming market in China is driven mainly by five major factors: a) consumption
upgrading and increasing purchasing power; b) the more advanced technology used in smartphones; c) the increasing popularity of online games and
e-sports among young people; and d) the growing popularity of mobile payments. In general, mobile live streaming can be categorized into pan-

entertainment mobile live streaming platforms, game live streaming mobile platforms, and others.
According to Frost & Sullivan, the total revenue of the game live streaming mobile market was US$834m in 2017; this is expected to increase to
1
April 20,2018
COMPANY / INDUSTRY NEWS
TMT INDUSTRY UPDATE – Live streaming platforms regain market attention
Analyst: Mark Po, CFA; Tel: [phone]; [email protected]; Mark JiangTel:(852)3698 6321; [email protected]
US$4.5bn by 2022, for a CAGR of 40.2%. Game live streaming platforms are another major segment of the overall live streaming market. The aver-
age MAU of game live streaming platforms in China was 279m in 2017 and this is expected to reach 518m in 2022, for a CAGR of 13.1%. There are
two main reasons for the rapid growth of game live streaming platforms in China: a) the fast development of online games and the e-sport market in
China. According to Frost & Sullivan, China’s game market generated US$32.2bn in revenue in 2017 and is expected reach 60.2bn by 2022, for a
CAGR of 13.3%; b) the development of mobile internet in China. There were 750m mobile internet users in China in 2017, and the mobile internet
penetration rate is expected to continue to increase with the expansion of 4G coverage and the introduction of 5G. According to Frost & Sullivan, the
total revenue of the game live streaming market in China was US$1.2bn in 2017 and is expected to reach US$4.9bn in 2022, for a CAGR of 33.6%.
Buiness model of Inke Limited. Inke is one of the leading mobile live streaming platforms in China. The Inke App is the Company’s core product,
with over 194.5m registered users in 2017. The Inke App has multiple innovative functions including Instant Watch, Real-time Beautification and PK,
which can improve the user experience and increases the popularity of the platform. Inke’s revenue was RMB28.7m, RMB4,334.9m and
RMB3,941.6m in 2015, 2016 and 2017, respectively. Inke generates revenue mainly through a) the live streaming business, and b) online advertising
through its Inke App. In its live streaming business, users can purchase Inke Diamonds to purchase a variety of virtual items for their favorite broad-
casters. Users can also use Inke Diamonds to subscribe for value-added services to enhance their interaction experience. In 2017, Inke’s live stream-
ing business generated about RMB3,919m, which accounted about 99.4% of Inke’s total revenue. For its online advertising business, Inke generates
revenue from arrangements with third parties who place their advertisements on the platform in various forms over a particular period of time. In 2017,
Inke’s online advertising revenue was RMB22.4m, which accounted for about 0.6% of Inke’s total revenue. In order to increase the platform’s populari-
ty and enhance user stickiness, Inke has introduced several innovative strategies: a) virtual item gifting, which is one of the most common strategies
used on most live streaming platforms. On Inke’s platform, the price of Inke’s virtual items ranges from RMB0.1 to about RMB13,140, and Inke fre-
quently releases new virtual items related to current events and popular culture trends to strengthen user stickiness; b) the “PK” feature, which allows
one streamer to compete against another, with the streamer who receives more virtual items from viewers winning the PK; c) Tri-party Live Chat,
launched in 2016, which allows viewers to apply and queue up to live chat with streamers. Tri-part Live Chat gives viewers a chance to directly interact
with their favorite hosts; and d) Multi-party Live Streaming Rooms, which can support up to six streamers in one room at the same time. Moreover,
Inke introduced a customized recommendation function by leveraging its data resources through AI technology.

Figure 3:Inke App platform Figure 4： Huya App platform

Source: CGIS Research Source: CGIS Research
2
April 20,2018
COMPANY / INDUSTRY NEWS
TMT INDUSTRY UPDATE – Live streaming platforms regain market attention
Analyst: Mark Po, CFA; Tel: [phone]; [email protected]; Mark JiangTel:(852)3698 6321; [email protected]
Business model of Huya Inc. [HUYA.US]. Huya is the leading game live streaming platform in China. In Q4 2017, Huya’s platform had over 38.8m
average mobile MAUs and 198.2m registered users. The Company’s total revenue was RMB796.9m and RMB2184.8m in 2016 and 2017, respective-
ly; and its net losses narrowed from RMB652.6m in 2016 to RMB81m in 2017. Huya monetizes its platform mainly from a) its live streaming business,
mainly through the sale of virtual items; and b) its online advertising business. In its live streaming business, users can access the online content on
Huya’s platform for free, but need to pay for various virtual items. Broadcasters will share a certain percentage of the revenue generated from the
sales of virtual items with Huya’s platform. On Huya’s platform, any user can register as a broadcaster and start live streaming, and in Q4 2017,
Huya’s platform had over 610,000 average monthly active broadcasters. In 2017, revenue generated from its live streaming business was
RMB2059.6m, up 161.3% YoY, accounting about 94.7% of total revenue. As for its online advertising business, Huya started to offer online advertising
services in October 2016 and generated revenue mainly from the sale of various forms of online advertising and promotion campaigns. Generally,
Huya offers three advertising forms: a) background advertisements, which are shown on the side of the screen; b) feed advertisements, which are
placed in various areas of the platform; and c) advertisements which appear on the launch screen of Huya’s mobile app. Currently, most online adver-
tising revenue is generated from the games industry, such as game developers, game publishers and e-sport organizers. Revenue generated from its
online advertising business was RMB4.9m and RMB115.3m in 2016 and 2017, respectively. To enhance platform popularity and user stickiness, Huya
a) actively encourages users to join its platform as broadcasters, and the platform shares a certain percentage of the profit from the sale of virtual
items with the broadcasters; b) cooperates with talent agencies to recruit more high quality broadcasters; and c) introduces various features to im-
prove the interaction between users and broadcasters, such as watch and flowing, content recommendation, and analytical tools for broadcasters.
To sum up, since iQiyi [IQ.US] started trading last month, Inke and Huya both have filed IPO applications, and Douyu also intends to start the IPO
process. We believe online video will be the key focus in the online entertainment industry and TMT non-hardware segment in 2018. Currently, Ten-
cent [0700.HK], Alibaba [BABA.US] and Baidu [BIDU.US] are the three leading platforms in the online video market in China. We believe smart TV
makers like Skyworth [751.HK] and TCL Multimedia [1070.HK] will benefit from the growth of the online video industry. The IPO of Inke and Huya may
attract market attention to live streaming platforms (most of which are listed in the US, like MoMo [MOMO.US] and Weibo [WB.US]), and related com-
panies, such as Tiange [1980.HK] and Meitu [1357.HK].
Figure 5:China mobile live streaming business model
Cash out
Gifting Support
Mobile live streaming
Viewers Broadcasters
platforms
Interaction Profit sharing
Profit
Basic
sharing
salary
Talent Agencies
Source: CGIS Research
3
April 20, 2018
COMPANY / INDUSTRY NEWS
TMT INDUSTRY UPDATE – Live streaming platforms regain market attention
Analyst: Mark Po, CFA; Tel: [phone]; [email protected]; Mark JiangTel:(852)3698 6321; [email protected]

Figure 6:China game live streaming business model
Third party
Team payment
Game
Platforms Licensing Online contents
(game Game Live
developers, Streaming Viewers
game Platforms
publishers) Promotion Purchase virtual items
Advertisers and
sponsors
Game Players
Source: CGIS Research
Figure 7:China live streaming ecosystem What we focus on
this report
Content Providers
IP owners China Lit [772.HK]
Traditional content provider such as License/purchase License/ purchase User Generated Content(UGC)
CCTV and Warner Bros. agreement fee
A Self-produced content by online
d video platforms (PGC)
v
U
e Revenue Content
r License agreement License fee sharing s
e
t
Advertising Content r
i income
s Video Platform such as iQiyi[BIDU.US], TencentVideo [700.HK], Youku-Tudou[BABA.US]
e
r Subscription fee
Service income Cloud services Access to platform and Fee/revenue
acquire subscribers sharing
Infrastructure Services, such as Alibaba cloud Third-party distribution channel like
[BABA.US] and Kingsoft cloud [3888.HK] TCL[1070.HK] and Skyworth [0751.HK
Rental income Fixed line/wireless We have talked about
networks
on April 4th, 2018 ,TMT
Network operators such as China Telecom update report
[0728.HK], China Mobile [0941.HK] and China
Unicom [0762.HK]
Source: CGIS Research
4