Summary of the Gaming Industry Conference Call Industry Overview - The gaming industry is experiencing a steady upward trend and stable performance, making it a worthwhile sector for investment in the current market environment, particularly due to the product cycle in 2023 and 2024 [1][3] Key Companies and Their Performance 1. Giant Network - The game "Supernatural Action Group" has a high Daily Active Users (DAU) count and utilizes content dissemination strategies to effectively reduce sales expenses, leading to profit release. Significant revenue contribution is expected in Q3 due to frequent version updates that extend the game's lifecycle [1][5] - In July, the game reached over one million concurrent users, with continuous updates planned for September, enhancing user engagement and revenue potential [5] 2. G-bits - G-bits launched three new games this year: "Wen Jian Chang Sheng," "Zhang Jian Chuan Shuo," and the mini-program game "Dao You Lai Wa Bao." These are expected to contribute positively to profits in Q3, with "Zhang Jian Chuan Shuo" also having an overseas version that will generate additional revenue [1][6] - "Wen Jian Chang Sheng" generated 363 million yuan in Q1 but saw a decline to 203 million yuan in Q2. "Zhang Jian Chuan Shuo" contributed 426 million yuan in Q2, with expectations for improved performance in Q3 [6] 3. Kaiying Network - Kaiying Network holds exclusive rights to the "Legend" franchise, allowing it to sign cooperation agreements with major publishers, generating stable annual revenues of 100 to 200 million yuan [1][7] - The "Legend Box" business is expected to generate 543 million yuan in revenue in the second half of 2024, with projections of 1 billion yuan in total revenue for 2025, reflecting a year-on-year growth rate of 40% to 70% [1][8] - The high gross margin of 92% to 93% for the "Legend Box" business significantly enhances the company's overall revenue and profit [8] Market Outlook - The performance of the gaming industry is expected to remain stable in 2025 and 2026, supported by a substantial product cycle. The gaming sector and its ETFs are projected to continue their steady growth despite volatility in other sectors [3][4] Recommendations - Investors are advised to focus on Giant Network, G-bits, and Kaiying Network due to their strong performance and growth potential in the current market environment [2][4][9]

Core Insights - The Chinese gaming industry showed strong growth in the first half of 2025, with total revenue reaching 168 billion yuan, a year-on-year increase of 14.08% [1][3] - A total of 23 A-share listed gaming companies reported a combined revenue of 53.84 billion yuan, up 22.78% year-on-year, with gaming revenue specifically increasing by 21.87% to 41.48 billion yuan [3][4] - The market is witnessing a polarization where leading companies are outperforming others, indicating a "stronger getting stronger" trend [2][8] Revenue Performance - Century Huatong led the A-share gaming companies with a revenue of 17.207 billion yuan, a remarkable increase of 85.50%, and gaming revenue of 16.399 billion yuan, up 93.60% [4][6] - 14 out of 23 companies reported revenue growth, with 10 companies seeing an increase in gaming revenue [3][4] - Companies like Kunlun Wanwei and Perfect World also showed significant growth, with Kunlun's revenue at 3.733 billion yuan (up 49.23%) and Perfect World's gaming revenue at 2.906 billion yuan (up 9.67%) [7][8] Profitability Trends - The net profit for 23 A-share gaming companies reached 8.027 billion yuan, significantly higher than the previous year's 4.758 billion yuan [14][15] - Century Huatong's net profit surged to 2.656 billion yuan, marking a 129.33% increase, while Perfect World returned to profitability with a net profit of 503 million yuan [15][17] - However, several companies, including Kunlun Wanwei, reported substantial losses, with a net profit decline of 110.90%, resulting in a loss of 859 million yuan [19][18] International Revenue - The overseas revenue for 15 companies with over 30% gaming revenue share reached 17.950 billion yuan, a 34.59% increase year-on-year [11][12] - Century Huatong was the standout performer with overseas revenue of 8.958 billion yuan, up 78.49%, primarily driven by successful game titles [12][13] - Other companies like Star Shine Entertainment also reported significant growth in overseas revenue, with a 139.83% increase [13][14] Cost and Investment Trends - The overall operating costs for the 23 companies increased by 22.02% to 17.368 billion yuan, while sales expenses rose by 18.84% to 17.847 billion yuan [24][25] - Research and development investment saw a modest increase of 2.36%, totaling 5.427 billion yuan, indicating a continued focus on marketing over R&D [24][26] - Companies like Century Huatong and Kunlun Wanwei experienced the highest increases in operating costs, with Century Huatong's costs reaching 5.249 billion yuan [23][25] Dividend Distribution - Among the 23 A-share gaming companies, only 5 announced mid-term cash dividends, with Jibite leading with a proposed dividend of 6.6 yuan per 10 shares [27][28] - Sanqi Interactive Entertainment has maintained a consistent dividend policy, proposing a cash dividend of 2.10 yuan per 10 shares for the eighth consecutive year [27]

Core Insights - The domestic gaming industry in China has shown a strong recovery in the first half of the year, with actual sales revenue reaching 168 billion yuan, a year-on-year increase of 14.08% [1] - The number of gaming users has also reached a historical high of 679 million, growing by 0.72% year-on-year [1] - The issuance of gaming licenses remains high, with 766 domestic online games approved in the first half of the year, a 21.97% increase compared to the same period in 2024 [2] Industry Performance - The gaming market is entering a phase of stock competition, with a significant disparity between companies holding popular products and those facing revenue pressures [2] - Among A-share and Hong Kong-listed gaming companies, 10 reported declines in both revenue and profit, while several others faced revenue declines or "increased revenue without increased profit" [2] Company Performance - Century Huatong leads the A-share gaming companies with a revenue of 17.2 billion yuan, up 85.5%, and a net profit of 2.656 billion yuan, up 129.33% [7] - Tencent and NetEase continue to dominate the market, with Tencent's domestic gaming revenue at 83.3 billion yuan and NetEase's at 51.6 billion yuan in the first half of the year [5] - 37 Interactive Entertainment reported a revenue decline of 8.08% to 8.486 billion yuan, but its net profit increased by 10.72% to 1.4 billion yuan [9][10] - Perfect World achieved a revenue of 3.691 billion yuan, a 33.74% increase, and turned a profit with a net profit of 503 million yuan [15][17] - Kunlun Wanwei's revenue reached 3.733 billion yuan, a 49.23% increase, but it reported a net loss of 856 million yuan [14] - G-bits reported a revenue of 2.518 billion yuan, up 28.49%, and a net profit of 645 million yuan, up 24.5% [18] Market Trends - The gaming industry is shifting towards high-quality game development and international expansion, moving away from imitation and low-quality products [4] - Companies are focusing on cost reduction and efficiency improvements to enhance profitability amid rising sales costs and market competition [18]

Industry Overview - The domestic gaming industry in China showed a strong recovery in the first half of the year, with actual sales revenue reaching 168 billion yuan, a year-on-year increase of 14.08%, marking a new high [1] - The number of gaming users reached nearly 679 million, a year-on-year growth of 0.72%, also a historical peak [1] - The issuance of gaming licenses remained high, with 766 domestic online games receiving licenses in the first half of the year, a 21.97% increase compared to the same period in 2024 [2] Market Competition - The gaming market has entered a phase of stock competition, with a growing disparity between companies holding popular products and those facing revenue pressures [2] - Among A-share and Hong Kong-listed gaming companies, 10 reported declines in both revenue and profit, while several others faced year-on-year revenue declines or "increased revenue without increased profit" [2] Company Performance - Century Huatong led the A-share gaming companies with a revenue of 17.2 billion yuan, up 85.5% year-on-year, and a net profit of 2.656 billion yuan, up 129.33% [7] - Tencent and NetEase continued to dominate the gaming market, with Tencent's domestic gaming revenue reaching 83.3 billion yuan and NetEase's gaming revenue at 51.6 billion yuan in the first half of the year [6] - 37 Interactive Entertainment reported a revenue of 8.486 billion yuan, down 8.08% year-on-year, but its net profit increased by 10.72% to 1.4 billion yuan [11] - Perfect World achieved a revenue of 3.691 billion yuan, up 33.74%, and turned a profit with a net profit of 503 million yuan [17] Cost Management and Strategy - Companies are focusing on cost management and efficiency improvements to counteract rising sales costs and the peak of user acquisition benefits [3][17] - Perfect World and G-bits have implemented strategies to reduce costs significantly, with G-bits' sales expenses halving, contributing to their profitability [17][18] - The gaming industry is shifting towards high-quality game development and international expansion, moving away from the previous reliance on imitation and low-quality games [4] Challenges and Future Outlook - Companies face challenges in product lifecycle management, with several major titles reaching maturity and new releases not yet stabilizing [13][15] - The need for continuous innovation and the development of new hit games is critical for maintaining market position and profitability [15][18]

Market Overview - The average stock price of A-shares is 13.29 yuan, with 142 stocks priced over 100 yuan, an increase of 17 stocks compared to the previous trading day [1] - As of September 5, the Shanghai Composite Index closed at 3812.51 points, up 1.24% [1] High-Value Stocks Performance - Among stocks priced over 100 yuan, Kweichow Moutai has the highest closing price at 1483.00 yuan, up 0.70% [1] - The average increase for stocks over 100 yuan today is 4.08%, outperforming the Shanghai Composite Index by 2.85 percentage points [1] - A total of 130 stocks increased in price today, with 10 stocks declining, including Haobo and Yingshi Innovation [1] Monthly and Yearly Performance - Over the past month, stocks priced over 100 yuan have averaged a 22.67% increase, while the Shanghai Composite Index rose by 6.40% [2] - Year-to-date, these high-value stocks have an average increase of 73.46%, outperforming the Shanghai Composite Index's 59.71% [2] - Notable performers include Shenghong Technology, New Yisheng, and Zhejiang Haideman, with year-to-date increases of 605.63%, 324.75%, and 301.50% respectively [2] Industry Distribution - The high-value stocks are concentrated in the electronics, computer, and pharmaceutical industries, with 43 stocks from the electronics sector, accounting for 30.28% of the total [2] - The main board has 31 stocks, the ChiNext has 47, and the Beijing Stock Exchange has 3, with 61 stocks from the Sci-Tech Innovation Board, representing 42.96% of the high-value stocks [2] Institutional Ratings - Nine stocks priced over 100 yuan received "buy" ratings from institutions today, including Zexin Pharmaceutical and Wanda Bearings, while Yigui Technology received its first institutional coverage [2]

Core Viewpoint - The gaming industry in A-shares and Hong Kong stocks has shown significant revenue growth, with A-share gaming companies reporting a 22% year-on-year increase in gaming business revenue and Hong Kong gaming companies reporting a 16% increase, indicating overall profit improvement for manufacturers [1] Group 1: Revenue Growth Drivers - The performance of new and evergreen games has driven revenue growth, with successful new releases such as Tencent's "Delta Action" and Xindong's "Fantasy Land M: Original Server" contributing to revenue increases in Southeast Asia and the Greater China region [2] - Flagship evergreen games from Tencent and NetEase have also seen growth, with several mid-sized manufacturers experiencing a rebound in older games [2] Group 2: Marketing and AI Strategies - Marketing strategies vary among manufacturers due to product cycle differences, with increased marketing investments noted for new game versions, while some companies have reduced sales expense ratios due to AI-driven efficiency improvements [3] - AI applications in gaming focus on enhancing user engagement through AI NPCs and UGC creation, while company-level applications aim to improve efficiency in art, coding, and customer service [3] Group 3: Future Outlook - The outlook for A-share gaming companies in Q3 is optimistic, with new game releases expected to significantly contribute to profits, exemplified by Giant Network's "Supernatural" and JiBit's "Staff Sword Legend" [4] - Continued focus on the sustainability of new games and the value of evergreen games, alongside global expansion efforts, is anticipated to drive demand [4]

Group 1 - The gaming sector experienced a short-term surge, with Giant Network rising over 7% [1] - Yaoji Technology saw an increase of more than 5% [1] - Other companies such as 37 Interactive Entertainment, Kaixin Network, and G-bits also experienced significant gains [1]

Core Viewpoint - The article discusses the investment strategies and outcomes of the company Jiubite in the gaming industry, highlighting its evolution from investing in familiar teams to more mature companies and the establishment of venture capital funds. Group 1: Investment History - In February, Jiubite announced a refund of 101 million yuan from the venture capital fund "Nuo Wei He Yue" due to the fund's investment period ending, with 242 million yuan remaining uninvested [1] - Jiubite has a history of supporting startup teams in the gaming industry, having invested heavily during the last expansion phase [3] - Before going public, Jiubite established an investment platform "Ji Xiang Capital" in 2016 with an initial investment of 600 million yuan [4] Group 2: Pre-IPO Investments - Jiubite invested in several gaming companies before its IPO, including Qingci Games (37.1% stake), which has a market value of 2.09 billion yuan, and Yongshi Network (20% stake) [5][6] - The investment in Qingci Games yielded nearly tenfold returns, with Jiubite initially investing 10 million yuan in 2013 and later selling shares for 303 million yuan [6][8] Group 3: Post-IPO Investment Strategy - After going public, Jiubite shifted its focus to investing in more mature companies with existing products, such as TapTap and other successful gaming developers [9][10] - Jiubite's investment in TapTap, which has grown to a monthly active user base of over 43 million, is considered highly successful [11] Group 4: Recent Investment Trends - Following the recovery of game licenses in 2019, Jiubite formed a venture capital fund "Ji Xiang Tian Cheng" with a total scale of 300 million yuan, focusing on early-stage startups in the gaming and cultural industries [15][16] - However, many companies funded by Ji Xiang Tian Cheng have faced challenges, with several experiencing full impairment of their equity value [18] Group 5: Strategic Adjustments - Since 2020, Jiubite has ceased raising external funds and has shifted to investing through private equity funds, including notable investments in Unity China and other gaming companies [24][25] - Despite a reported asset impairment of 355 million yuan over three years, this has not significantly impacted Jiubite's overall profitability, as the company has emphasized a strategy of focusing on fewer, more promising projects [29]

Core Insights - The domestic gaming industry in China is showing strong recovery, with 11 out of 26 listed companies reporting both revenue and profit growth in the first half of 2025, while 7 companies experienced declines [1] - The actual sales revenue of the domestic gaming market reached 168 billion yuan, a year-on-year increase of 14.08%, with the user base growing to nearly 679 million, marking historical highs [1] - Policy support has played a significant role in this recovery, with 766 domestic online games receiving approval in the first half of 2025, a 21.97% increase compared to the same period in 2024 [1] Group 1: Company Performance - Perfect World achieved a net profit of 503 million yuan in the first half of 2025, turning losses into profits, driven by game revenue contributions [3] - Icefire Network also turned losses into profits, with a significant reduction in sales expenses attributed to a shift in investment strategy towards refined operations [3] - G-bits reported an increase in net profit due to a major restructuring of its product lineup, focusing on core self-developed products and high-quality agency products [4] Group 2: Market Challenges - Not all companies benefited from the industry's growth; for instance, Zhangqu Technology reported a net profit of 48 million yuan, a decline of 65.58% due to the lifecycle of older products [5] - Shenzhou Taiyue's revenue fell by 12.05%, with a significant drop in game revenue attributed to the stabilization of previously high-growth titles [5] Group 3: AI Integration - Major gaming companies are increasingly integrating AI technology across the entire game development and distribution chain, enhancing production efficiency and creating competitive advantages [6][7] - 37 Interactive Entertainment reported that over 80% of its 2D art assets were generated using AI, significantly boosting production capabilities [6] - Century Huatong is focusing on computational power and has seen rapid growth in revenue and profit from its AI-related projects [7] Group 4: Future Outlook - The industry is shifting from scale expansion to deep integration of technology and content, with a focus on balancing short-term profitability and long-term technological investments [8][9] - Analysts emphasize the importance of technological upgrades, including AI applications, to enhance market competitiveness and drive sustainable value [8][9]

Summary of the Conference Call on the Gaming Sector Industry Overview - The gaming sector in A-shares has shown strong performance in August 2025, continuing a positive trend since the beginning of the month, significantly outperforming other sectors in September [2][3][5]. Key Companies and Products - **ST Huatuo**: - "Wild Survival" achieved over $200 million in global revenue in August, a 17% month-over-month increase, with overseas iOS and Google Play contributing over $150 million, up 21% [1][2]. - "King Shot" generated $77.6 million in August, a 26% increase [2]. - "Tasty Travels" maintained a steep growth trajectory, reaching nearly $10 million in August, with a 24% month-over-month increase [2]. - **Giant Network**: - "Supernatural" has shown outstanding performance since the first half of 2025, with domestic iOS revenue in August increasing by 73% [4]. - **G-bits**: - "Sword of the Hero" performed well in overseas markets, with a 62% month-over-month increase in Hong Kong, Macau, and Taiwan, and a 116% year-over-year increase in Japan [4]. - **Xindong Company**: - The performance was driven by older games, with "Xindong Town" reaching a new high in July due to anniversary celebrations and IP collaborations [1][4]. - **Perfect World**: - "P5X Persona" exceeded expectations in Japan, contributing significantly to revenue growth, with overseas revenue in July between 140 million to 150 million RMB, and around 80 million RMB in August [1][8]. Financial Performance - In Q2 2025, 25 major A-share gaming companies reported total revenue of 27.9 billion RMB, a 23% year-over-year increase and a 4% quarter-over-quarter increase, significantly outperforming the overall domestic gaming industry growth of 10% year-over-year and -4% quarter-over-quarter [11]. - Net profit attributable to shareholders totaled 4.6 billion RMB, a 100% year-over-year increase and a 25% quarter-over-quarter increase [11]. Profitability Metrics - The gaming sector's gross margin was 68% in Q2 2025, up 3 percentage points year-over-year and 2 percentage points quarter-over-quarter, attributed to high-quality products reducing reliance on traditional channels [3][12]. - Sales expense ratio remained stable at 33%, indicating that revenue growth was not solely dependent on user acquisition spending [3][13]. Future Outlook - The gaming sector is expected to continue its growth trajectory in the second half of 2025 and into 2026, driven by several factors: - Continued strong performance of existing popular games and new product launches [5][6]. - Expansion into international markets and new game releases, such as ST Huatuo's upcoming titles [5][6]. - Increasing demand for digital entertainment and technological advancements enhancing user experience [6]. - The valuation of the sector remains reasonable, with a central estimate below 20 times earnings, suggesting potential for continued outperformance [15]. Noteworthy Trends - The application of AI in game development and marketing is expected to enhance efficiency and quality, with significant portions of advertising content being produced by AI [15]. - Companies with strong product lines and forward-looking AI strategies, such as ST Huatuo, Giant Network, G-bits, and Perfect World, are recommended for attention [17]. Additional Insights - Older games have shown resilience, with several maintaining stable revenue streams, indicating a potential for sustained performance [7][10]. - The competitive landscape has improved, with companies leveraging community marketing and content-driven strategies to reduce traditional user acquisition costs [14]. This summary encapsulates the key points from the conference call regarding the gaming sector, highlighting the performance of specific companies, financial metrics, and future outlooks.