The RDR2 success indicates the enormous potential of CP77
Taking into account the results of 3Q18 and information from the company's conference, we are lowering ours net profit forecast for 2018p / 2019p / 2020p by 9% / 1% / 4%. The key changes are lower forecasts for Gwent (number of downloads 0.5m per year vs 1m previously) and Thronebreaker (selling 200k copies in 4Q18 vs. 500k previously and lowering sales subsequent campaigns from 1m to 200k copies per year). Both titles are monetized below the management's expectations and now constitute only a total of only 5% of our forecasts CDR revenues in 2018-2027p (vs 11% previously).
From our edition the previous recommendation, the CDR share price fell by 33% (-26pp vs. WIG), while sector rating by less than 20%. We think that this is not fully justified fundamentally. A great debut of Red Dead Redemption 2 in October (gross sale USD 725m in 3dni) shows, in our opinion, market potential AAA titles such as Cyberpunk 2077 - in this light, our sales assumptions 19m copies in the premier quarter seem conservative. Based on ours forecasts 2018-2020p, CDR is valued at mid-cyclical P / E 17.2x (7% discount to global premium game producers). We are upgrading recommendation for CD Projekt from Neutrally to Buy, 12M TP PLN 202 (previously PLN 228).
Cyberpunk 2077 vs RDR2: We keep our debut in 4Q19, sale 19m copies in the first quarter of the premiere and revenues PLN 1.9bn (USD 525m). On teleconferences management confirmed that quality remains an absolute priority for the CDR and Cyberpunk 2077 will be no less polished than RDR2. For comparison - RDR2 (gross) sales amounted to USD 725m in 3 days from the premiere, 15m in 8 days from premieres and 17m copies in 12 days (Take Two data). The game only went to consoles PS4 / XboxOne. In this light, our forecasts for CP2077 look conservative - the game will come simultaneously on the PC and consoles. To this we believe that the world of Cyberpunk / sci-fi should be more popular among players than the Wild West theme
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