Investment Rating - The report maintains a "Buy" rating for the media industry [5] Core Insights - The media industry (Shenwan) saw a weekly increase of 1.55%, ranking 4th among industries, while the Shanghai Composite Index and Shenzhen Component Index both fell by 0.25% and 0.60% respectively [12][18] - Key companies such as Yuanlong Yatu, Chuanwang Media, and Giant Network showed strong performance, with notable weekly gains [18] - The gaming sector continues to thrive, with 33 Chinese companies making it to the global mobile game publisher revenue list, collectively earning $20.2 billion, accounting for 36.6% of the total revenue [29] Summary by Sections Market Performance - The media industry experienced a weekly increase of 1.55%, outperforming the Shanghai Composite Index and Shenzhen Component Index, which fell by 0.25% and 0.60% respectively [12] - The gaming sector saw a 2.57% increase, while advertising and film sectors also reported gains [12][18] Key Industry Data AI Application Data - Gemini's web access increased by 28.9% in May, ranking third among AI products, while Sora's access surged by 121.25% [22] - The top five AI products in China include DeepSeek, Nano AI Search, Doubao, Qwen.ai, and Baidu Wenku [24] Gaming Data - The top three mobile games as of June 12, 2025, are "Honor of Kings," "Mingchao," and "Peace Elite" [27] - The newly launched game "Zhang Jian Chuan Shuo" ranked 15th on the iOS bestseller list [27] - Tencent remains the top mobile game publisher, with "Delta Action" showing a 29% increase in revenue [29] Film Data - The total box office for the week of June 7-13, 2025, was 244 million yuan, with "Mission: Impossible 8" leading the box office [34] - Upcoming films for the summer season are generating significant attention, particularly "Breakup List" [35] Key Industry Events and Announcements - The Zhejiang Provincial Government issued measures to support the overseas expansion of the gaming industry, effective July 10, 2025 [38] - Tencent Music announced plans to acquire Ximalaya for $12.6 billion in cash and stock [38] - Chinese Online launched the "XIAOYAO" platform for international creators, focusing on AI-assisted writing [38]

Core Insights - 2024 is seen as a pivotal year for the gaming industry, with companies facing challenges due to market shifts and increased competition [1] - A total of 30 publicly listed gaming companies reported impairment losses, indicating significant operational issues and reduced goodwill [1] - The trend of startups heavily investing in single products has led to many failures, particularly among newer companies [2] Group 1: Impairment Losses and Company Performance - Guangzhou Zhuoyou reported an impairment loss of approximately 26.66 million yuan due to poor performance of its game "One Piece: Dream Pointer," which was launched in April 2023 and subsequently taken down [3][5] - Chengdu Fanpas faced an impairment loss of about 4.31 million yuan, primarily due to the failure of its second game "Leap Rainbow Mirror," which was released in June 2023 [7][9] - Shanghai Mumu reported an impairment loss of approximately 16.79 million yuan, attributed to the underperformance of its game "Galaxy Explorers: New Home" [10][11] Group 2: Market Challenges and Competitive Landscape - The gaming market is increasingly saturated, making it difficult for new entrants to compete against established products, even with strong backing from major investors [18][26] - Companies like Shanghai Wuwei and Shanghai Yuelong Zhiyu are struggling due to poor performance of their flagship titles, leading to significant impairment losses [19][24] - The report highlights that many companies are facing a lack of clear financing plans and ongoing losses, which complicates their ability to recover [9][10] Group 3: Investment Trends and Strategic Shifts - Investment strategies among listed companies are shifting, with some focusing on expanding their strengths while others are exploring new areas [47][48] - Companies like Perfect World and Ke Ying Network are adjusting their investment approaches in response to market conditions, indicating a cautious outlook [48][49] - The overall trend suggests a cooling investment climate, impacting both established and emerging companies in the gaming sector [48]

Core Viewpoint - The A-share gaming stocks are experiencing significant activity, with notable gains in several companies following the announcement of supportive measures for the gaming industry from the Zhejiang Provincial Department of Commerce [1] Group 1: Market Activity - A-share gaming stocks are active in the morning session, with Giant Network hitting the daily limit up [1] - Other companies such as G-bits, Xunyou Technology, Perfect World, Iceberg Network, Kaiying Network, Shenzhou Taiyue, and Zhangqu Technology also saw increases [1] Group 2: Policy Support - The Zhejiang Provincial Department of Commerce, along with 17 other departments, issued measures to support the overseas expansion of the gaming industry [1] - These measures will take effect starting July 10, 2025 [1]

Investment Rating - The report maintains a "Buy" rating for key companies in the media sector, including 吉比特 (G-bits), 恺英网络 (Kying Network), and 姚记科技 (Yaoji Technology) [8][19][31]. Core Insights - The media industry has shown a weekly increase of 2.59%, ranking 7th among various sectors, outperforming the Shanghai Composite Index and the CSI 300 Index [2][11]. - The AI sector continues to thrive, with significant growth in subscription revenues for products like ChatGPT, which reached an annualized revenue of $1.25 billion, reflecting a 20% month-over-month increase [3][23]. - 吉比特's new game, 《杖剑传说》, has entered the iOS bestseller list, ranking 11th, indicating strong market performance [4][31]. - The film industry saw a total box office of 460 million yuan during the Dragon Boat Festival, a year-on-year increase of 20.1%, with the top film, 《碟中谍 8：最终清算》, grossing 191 million yuan [39][41]. Summary by Sections Market Performance - The media sector's weekly performance from May 31 to June 7 shows a 2.59% increase, with the gaming sector leading at 4.12% [11][19]. - Key stocks such as ST 联合 and 湖北广电 saw significant gains, with increases of 21.36% and 20.41% respectively [19][20]. AI Sector - In May 2025, ChatGPT's annualized subscription revenue reached $1.25 billion, with a 14.38% year-over-year growth [23][24]. - Chinese AI applications like 百度网盘 and 夸克 ranked among the top ten globally in monthly active users, with 百度网盘 reaching 153.14 million users [25][28]. Gaming Sector - 吉比特's new game, 《杖剑传说》, has achieved notable success, ranking 11th on the iOS bestseller list as of June 5 [31][32]. - The gaming market continues to show robust performance, with major titles like 《王者荣耀》 and 《和平精英》 leading the sales charts [31][32]. Film Sector - The total box office for the Dragon Boat Festival reached 460 million yuan, with a significant contribution from the top film, which accounted for 41.5% of the total box office [39][41]. - Over 60 films have been scheduled for the upcoming summer season, indicating a strong pipeline for the film industry [39][41].

Core Viewpoint - A major operational incident occurred in the game "Yinian Xiaoyao" under the A-share game company Gigabit, where game items worth approximately 500,000 yuan were mistakenly distributed to all players, leading to significant disruptions in the game's economy and balance [3][5]. Group 1: Incident Details - On May 31, during the Dragon Boat Festival, "Yinian Xiaoyao" mistakenly issued 99,000 high-value items called "Any Treasure Box" to all players due to human error, valued at around 500,000 yuan [3][5]. - The project team initiated an emergency response on the same day and announced on June 2 that they would not implement the common industry practice of a "full server rollback," but instead opted for a "point-to-point rollback" for affected players [5][6]. - Players who received the erroneous items were temporarily banned from listing on the official trading platform, and the project team offered compensation of 20 "Any Treasure Boxes" to affected users [5][6]. Group 2: Financial Performance - Gigabit's annual report indicated that "Yinian Xiaoyao" generated 596 million yuan in revenue for 2024, a decrease of 42.49% from 1.036 billion yuan in 2023, making it the worst-performing among Gigabit's three major games [6][7]. - Overall, Gigabit reported a revenue of 3.696 billion yuan in 2024, down 11.69% year-on-year, with net profit declining by 16.02% to 945 million yuan [7][8]. - In the first quarter of 2025, "Yinian Xiaoyao" continued to see a revenue decline of 22.94%, while the company benefited from the launch of a new game, "Wanjian Changsheng," leading to a 22.47% increase in overall revenue [8]. Group 3: Industry Context - The incident highlights a recurring issue in the gaming industry, where operational errors can lead to significant player dissatisfaction and potential loss of users, as seen in previous cases with other major games [9]. - Industry analysts emphasize the importance of implementing tiered review systems before large operational changes to minimize errors and ensure effective crisis management following incidents [9].

Investment Rating - The report maintains a positive investment rating for the gaming sector, highlighting its valuation safety and high dividend yield [1]. Core Views - The report emphasizes the strong performance of leading companies in the media and gaming sectors, particularly noting the recent success of ST Huatuo and its games [1]. - The gaming sector is expected to continue its growth, driven by strong quarterly results from major players like Tencent, which reported over 20% growth in its gaming business [6]. - The report suggests that the gaming industry is less affected by trade tensions and economic fluctuations, indicating a stable investment environment [6]. Market Performance Overview - The media industry index rose by 1.73% in the past week, ranking fifth among all sectors, while the gaming sector has shown consistent performance with several leading companies exceeding market expectations [9][11]. - The report notes that the total market capitalization of the industry is approximately 1,708.1 billion, with a circulating market value of 1,550.8 billion [3]. Gaming Sector Highlights - The report highlights the recent launch of new games by companies like Jibite, which has seen significant early success with its titles [6]. - Jibite's new game "Wand Sword Legend" quickly reached the second position in the free game rankings and has over 2 million registered users for another title [6]. - The report also mentions the long-term stability of existing games, with consistent revenue generation from titles like "Wandao" and "Wandao Mobile" [6]. Company Performance - The report identifies several key companies to watch, including Tencent, Huatuo, Jibite, and others, which are expected to perform well in the upcoming quarters [1][6]. - The report notes that the gaming sector's institutional holdings are closely aligned with the CSI 300 index, indicating a balanced investment approach [6]. Film and Television Sector Insights - The report provides insights into the film sector, noting that the top films of the week were predominantly Chinese, with significant box office earnings [16]. - The television sector is also highlighted, with top-rated shows achieving high viewership ratings across various platforms [20][21]. Book Publishing Sector - The report mentions the best-selling books in both fiction and non-fiction categories, indicating a diverse interest in literature among consumers [32][33].

Core Viewpoint - The gaming industry is facing significant challenges from private servers and cheating tools, which negatively impact the healthy development of the industry and the normal operations of gaming companies [1] Group 1: Industry Actions Against IP Infringement - Major gaming companies in China have intensified efforts to combat intellectual property infringement, achieving notable results [2][4] - Giant Network (002558) collaborated with law enforcement to dismantle a private server operation related to the game "Original Journey," resulting in the arrest of 11 suspects and an involved amount of nearly 1 million yuan [2] - The "Sword Net 2025" initiative, launched by multiple government departments, aims to strengthen copyright protection in the anime and gaming sectors, focusing on illegal copying and distribution [3] Group 2: Company-Specific Achievements - Century Huatong reported two significant achievements in IP protection, including administrative penalties against private server operators of "Fengyun" and the dismantling of the "Firebird Engine" technology chain related to "Legend 3" [5] - Other leading gaming companies, such as NetEase and miHoYo, have also reported cases of combating private servers and cheating tools, with a notable court ruling in April ordering compensation of 1.52 million yuan for unauthorized private server operations of "Dream Journey" [5] Group 3: Ongoing Commitment to IP Protection - G-bits (603444) expressed strong support for the "Sword Net 2025" initiative and committed to continuous high-pressure measures against private servers and cheating tools [6] - Giant Network plans to enhance its efforts against private servers related to the "Journey" IP through technological and legal means to protect player rights [6]

Summary of Key Points from the Conference Call Industry Overview - The gaming sector in China experienced a strong recovery, with April 2025 domestic gaming market revenue increasing by 22% year-on-year to 27.35 billion yuan, driven primarily by mobile games which grew by 28.4% [1][5] - The overseas mobile gaming revenue from China also saw a growth of 9.6% year-on-year, reaching 1.554 billion USD, indicating the increasing competitiveness of Chinese games in the global market [1][5] Core Insights and Arguments - The gaming sector has been performing well since Q3 2024, with a continued positive outlook into 2025, supported by product cycles, favorable policies, and the emergence of AI-native games [2] - Major gaming companies like Tencent, NetEase, and miHoYo are expected to launch significant new products in Q4 2025, which will drive market growth [1][7] - The A-share gaming market is anticipated to maintain high growth rates in Q3 and Q4 2025, with several new games in testing phases [7] Company-Specific Highlights - **Perfect World**: The new game "异火" is expected to generate over 5 billion yuan in its first year, and the company has undergone management changes to improve operational efficiency [3][19] - **Giant Network**: The game "超自然行动组" has exceeded expectations in economic performance, with a projected 15% year-on-year increase in net profit for 2025 [11][30] - **ST Huatuo**: The company’s product "Wild Chaos Survival" has maintained its position as a top overseas mobile game, with monthly revenue exceeding 200 million USD [1][12] Emerging Trends and Innovations - The gaming industry is leveraging innovative business models and technologies, such as AI and IP integration, to enhance user engagement and revenue [4][28] - The introduction of AI gameplay in games like "太空杀" has shown significant user acceptance, with a 30% penetration rate among daily active users [28] Future Product Pipeline - Notable upcoming games include Tencent's "DNF Mobile" and miHoYo's "绝区 0", which are expected to further propel industry growth [6] - Companies like 凯英网络 and 吉比特 have a robust pipeline of new games, with several already showing promising early performance [8][10] Financial Performance Expectations - ST Huatuo is projected to achieve revenues of 5 to 5.5 billion yuan in 2025, with a strong performance from its core products [17] - Perfect World is expected to see a profit of 2.6 billion yuan in 2025, supported by multiple new game launches [22] Investment Recommendations - The report recommends investing in ST Huatuo, Perfect World, 凯英网络, 吉比特, and Giant Network, citing their strong product pipelines and favorable market conditions [31]

Summary of G-bits Conference Call Company Overview - G-bits is a gaming company with a core valuation range of 15-19 times earnings, reflecting optimism for growth in the gaming sector due to the upcoming summer season and advancements in AI applications [2][3]. Key Products and Market Performance - **"Wanjie Changsheng"**: Launched in January, it generated 360 million in revenue and maintained monthly revenue in the tens of millions during Q2, exceeding profit expectations but still lagging behind "Yinian Xiaoyao" [2][4]. - **"Wandao Mobile Game"**: The anniversary event showed stable performance, positively impacting Q2 results, indicating the ongoing profitability of older products [2][4]. - **"Zhangjian Chuan Shuo"**: Its ranking on sales charts has been steadily rising, with expectations to contribute profits in Q3, showcasing strong market potential [2][4]. - **"Jiumuzhiyu"**: An upcoming SLG agency product currently in the second round of testing, its performance will determine its launch timing and impact on annual results, making it a key factor for future growth [2][5][6]. Financial Expectations - G-bits is projected to achieve a profit of approximately 1.05 billion this year, corresponding to a valuation of 19 times earnings, providing a reference point for investors [2][4]. Industry Insights - The overall performance of the gaming sector in Q2 2025 was strong, continuing a high growth trend. The market share of A-share gaming companies increased due to weaker product lines from major players like Tencent and NetEase [3]. - The gaming sector's valuation is on an upward trajectory, with core companies valued between 15-19 times earnings, leading to a recommendation for overweighting the gaming sector [3]. Strategic Adjustments - G-bits has undergone organizational and strategic adjustments after facing challenges, with the founder personally involved in R&D. The company is focusing its release strategy, indicating potential for improved product realization and profitability [2][7]. - The company is positioned as a small yet innovative gaming firm, suggesting a balanced approach in R&D and distribution, warranting close attention to new product developments and market performance [7].

Summary of Conference Call Records Industry Overview - The domestic gaming market continues to show high growth, with the industry scale increasing by over 20% year-on-year in April 2025, and a month-on-month growth of nearly 2-3 percentage points. Major companies like Tencent and miHoYo have significantly contributed to this growth through long-term game operations and version updates [1][2][4]. Key Points and Arguments - **New Game Releases and Seasonal Impact**: The summer release schedule is a crucial catalyst for growth, with companies like Electric Soul, G-bits, Perfect World, and 37 Interactive Entertainment planning new game launches or testing. The monthly increase in game approvals also positively impacts the market [1][3][4]. - **Performance of Major Titles**: Giant Network's "Supernatural Action Group" has shown promising performance in certain channels, with expectations for revenue and profit growth following its full launch and summer marketing efforts [5][6]. - **Financial Performance**: G-bits' M72 achieved a revenue of 360 million, exceeding expectations. Century Huatong's products like King Shot and Dragon Valley also performed well, validating the logic that new games drive performance release [6][7]. - **AI Integration**: The gaming sector is leveraging AI for cost reduction, the introduction of intelligent NPCs, and simulated PVP features, which enhance gameplay duration and commercial potential. Companies like Kaiyin are testing AI-driven products, indicating that the value of AI integration is not yet fully reflected in valuations [3][9]. Additional Important Insights - **Valuation Trends**: Currently, A-share gaming companies are valued at approximately 17 times earnings, lower than the over 30 times valuation seen in 2023 driven by cloud gaming, metaverse, and AI concepts. With favorable policies and ongoing AI commercialization, valuations are expected to rise [3][10][11]. - **Future Performance Expectations**: As the summer season progresses and new game cycles begin, companies are anticipated to see further performance improvements. The overall market sentiment is positive, with many A-share companies having room for valuation increases and better stock performance [5][12]. - **Companies to Watch**: Key companies to monitor include Giant Network, Perfect World, and G-bits, which have significant catalysts for growth and performance in the near future [12].