Group 1 - The core viewpoint of the articles highlights the rapid growth of the Chinese mini-game market, which achieved a sales revenue of 23.276 billion yuan with a year-on-year growth rate of 40.2%, significantly outpacing the mobile game market's growth of 16.55% [1] - The company, 37 Interactive Entertainment, is diversifying its business model beyond traditional gaming by focusing on "technological innovation, quality development, and brand value enhancement" to build a sustainable entertainment technology ecosystem [1] - The company is reducing its reliance on traditional user acquisition methods and is leveraging technology to enhance content efficiency through AI models and automated tools, aiming for intelligent marketing and cost reduction [2] Group 2 - The long-term operational capabilities of existing games are being strengthened, with titles like "Seeking the Path of the Universe" and "Time Grocery Store" effectively extending game lifecycles through various engagement strategies [3] - New products are achieving impressive results, with "Time Explosion" reaching the top of the iOS free chart upon launch, and "Heroes Have No Flash" quickly entering the top five of the iOS sales chart [4] - The company is expanding its self-developed capabilities and forming a rich external development reserve by collaborating with high-quality developers across various genres [5] Group 3 - The company has received multiple national and industry honors, including being recognized as a key enterprise for cultural exports and a model base for cultural industries, reflecting its leadership in internationalization and social responsibility [6] - The company emphasizes ESG (Environmental, Social, and Governance) principles to empower sustainable development, showcasing its commitment to social responsibility [7] Group 4 - The company has established a top-tier research and development system, utilizing advanced technologies such as next-generation 3D engines and AI to enhance game development and operational efficiency [8] - 37 Interactive Entertainment has been a pioneer in overseas game publishing, successfully distributing games in over 200 countries and regions, thereby contributing to the global cultural narrative [9] Group 5 - The company has implemented a robust talent strategy that includes enhanced employee benefits, such as additional insurance and housing loans, to attract and retain talent [10][14] - The company promotes a balanced work-life culture with policies that support employee well-being, including flexible working hours and generous leave policies [13][17] - The company offers competitive salaries for new graduates, with technical positions reaching up to 800,000 yuan annually, and provides performance-based bonuses and long-term incentives [23][26] Group 6 - The company's future strategy focuses on deepening global expansion and diversification, leveraging technology and quality products to maintain leadership in the global entertainment sector while achieving a balance between commercial success and social responsibility [27]

Investment Rating - The report maintains an "Outperform" rating for the media industry [3] Core Insights - The media sector outperformed the market in November, with the Shenwan Media Index rising by 1.69%, surpassing the CSI 300 Index by 4.14 percentage points, ranking 7th among 31 industries [4][20] - The number of game approvals reached a new high, with 178 domestic games and 6 imported games approved in November, contributing to a total of 1,625 game approvals from January to November, a year-on-year increase of 26.8% [4][28] - The gaming market revenue in October was 31.4 billion yuan, a year-on-year growth of 7.8%, driven by strong product cycles from leading companies [4][32] Summary by Sections Market and Industry Review - The media sector's performance in November was strong, with a 1.69% increase in the Shenwan Media Index, outperforming the CSI 300 Index [4][20] - The current TTM-PE for the Shenwan Media Index is 42.6x, positioned at the 82.2% percentile over the past five years [20][26] Gaming - The number of game approvals in November was the highest in three years, with a total of 178 domestic and 6 imported games approved [28] - The gaming market revenue in October was 31.4 billion yuan, with mobile gaming revenue at 22.6 billion yuan, reflecting a year-on-year growth of 2.4% [32] - The overseas revenue for Chinese self-developed games reached 1.799 billion USD in October, marking an 11.9% year-on-year increase [41] Film and Television - The total box office in November reached 3.553 billion yuan, a year-on-year increase of 89.3%, primarily due to the success of "Zootopia 2" [49] - The top five films in November included "Zootopia 2," which grossed over 2.2 billion yuan within nine days of release [60] - The drama market saw high viewership, with "The Tang Dynasty Mysteries" leading with 1.5 billion views [67] AI Applications - The report highlights advancements in AI video models, including the launch of the O1 video model by Keling AI, which allows users to generate videos from text prompts [79] - PixVerse V5.5 was released, enabling the creation of multi-angle narrative videos [84] - Google's Gemini 3 Pro and Nano Banana Pro were launched, showcasing significant improvements in AI capabilities [91] Investment Recommendations - The report suggests focusing on the gaming sector's new product cycles and AI applications, recommending companies such as Giant Network, G-bits, and K-Game Network [96] - The December investment portfolio includes Giant Network, K-Game Network, Bilibili, and HuiLiang Technology [7]

Investment Rating - The industry investment rating is "Overweight," indicating that the industry is expected to outperform the overall market [9]. Core Insights - The report highlights the competition for C-end AI entry points in the internet sector, with significant developments from ByteDance and Alibaba. ByteDance's upcoming conference will focus on the performance and pricing of its Doubao model, while Alibaba has restructured its C-end business group to enhance its AI capabilities [2]. - The gaming sector shows promising growth, with companies like Giant Network and 37 Interactive Entertainment being recommended due to their strong product pipelines and market potential. The report anticipates a net profit of 3.21 billion for 37 Interactive Entertainment in 2025, with a PE ratio of 15x [2]. - The advertising sector, particularly Focus Media, is noted for its ongoing mergers and high dividend support, with expectations of continued investment in internet advertising [2]. Summary by Relevant Sections Internet Sector - ByteDance is focusing on the performance of its Doubao AI model and cloud business strategy, while Alibaba aims to create a super app through its newly formed C-end business group [2]. - Alibaba Cloud's revenue growth has accelerated, with a year-on-year increase of 34% for FY26Q2, marking eight consecutive quarters of growth [2]. Gaming Sector - Giant Network is expected to see significant user growth and revenue increase, while 37 Interactive Entertainment is entering a profit recovery phase with a projected net profit of 3.21 billion in 2025 [2]. - The report emphasizes the potential of the young female gaming market and the company's ability to adapt and innovate [2]. Advertising Sector - Focus Media's merger with New Wave is progressing, which is expected to enhance its bargaining power within the industry. The company has shown strong alpha performance despite macroeconomic challenges [2]. - The report anticipates sustained investment in internet advertising, particularly in local life services and AI applications [2]. Valuation Table - The valuation table provides insights into key companies, showing Tencent Holdings with a market cap of 51.14 billion and a projected revenue growth of 14% for 2025. Other companies like Giant Network and 37 Interactive Entertainment are also highlighted for their growth potential and profitability metrics [4].

Group 1 - The company is expected to maintain steady growth in performance due to strong issuance capabilities and a rich reserve of new games, with projected P/E ratios for 2025 and 2026 at 14.9x and 13.5x, respectively, below the industry average of 26x and 17x, maintaining a "strong buy" investment rating [1] - The company has successfully transitioned from simple product exports to deep localized operations, achieving significant success in global markets with its flagship product "Puzzles & Survival," which combines innovative gameplay and precise regional strategies [1] - The company has established a diverse product matrix covering various genres such as SLG, MMO, card games, and simulation management, implementing differentiated operational strategies for different regional markets, providing strong momentum for overseas business growth [1] Group 2 - The domestic mini-program game market has experienced explosive growth, with a projected scale of nearly 40 billion in 2024 and a compound annual growth rate of 143.77% from 2021 to 2024, positioning the company as a leader in this space with successful products like "Seeking the Dao of the Universe" and "Time Explosion" [2] - The company has built a complete mini-game ecosystem by leveraging its "research and operation integration" advantage, creating a refined operational model that includes user acquisition, community operation, and cross-industry collaboration [2] - The company has innovated a monetization model that combines in-app purchases and advertising, successfully balancing user expansion and maximizing commercial value, making mini-program games a key driver of revenue growth [2] Group 3 - The domestic SLG mobile game market continues to grow, with a high growth rate of 33.3% expected in the first half of 2025, presenting opportunities for innovative products despite high concentration among leading products [3] - The company has solidified its core advantages in SLG through a "self-research + co-research" model, establishing a dedicated studio for SLG development and deep partnerships with quality development partners [3] - The company has a reserve of 10 SLG products by the first half of 2025, exploring both classic 4X SLG advantages and innovative gameplay such as "survival building + SLG," benefiting from category growth [3] Group 4 - The company has maintained steady revenue growth, with projected revenue of 17.44 billion in 2024, reflecting a year-on-year increase of 5.4%, and a significant improvement in profit with a 49.24% year-on-year increase in net profit attributable to shareholders in Q3 2025 [4] - The company emphasizes shareholder returns, with a total dividend and repurchase amount of 2.3 billion in 2024 and a quarterly dividend plan for 2025, having already implemented approximately 1.386 billion in dividends in the first three quarters, resulting in a dividend rate of about 59% [4] - The company projects revenues of 16.36 billion, 19.17 billion, and 20.63 billion for 2025 to 2027, with corresponding year-on-year growth rates of -6%, 17%, and 8%, and net profits of 3.06 billion, 3.37 billion, and 3.69 billion, with P/E ratios of 14.9x, 13.5x, and 12.4x, indicating undervaluation and potential for valuation recovery [4]

Core Viewpoint - The report from CITIC Securities highlights the robust financial performance of Sanqi Interactive Entertainment, with a significant year-on-year increase in net profit for the first three quarters of 2025, indicating strong growth potential in the gaming industry [1] Financial Performance - For the period of January to September 2025, the net profit attributable to shareholders reached 2.345 billion yuan, representing a year-on-year growth of 23.57% [1] - In Q3 2025, the net profit attributable to shareholders was 944 million yuan, showing a remarkable year-on-year increase of 49.24% [1] - The non-recurring net profit for Q3 was 870 million yuan, reflecting a year-on-year growth of 45% [1] Dividend Distribution - The company plans to distribute a cash dividend of 2.10 yuan for every 10 shares to all shareholders [1] Product and Technology Development - The company has a rich product matrix, and its future pipeline is expected to be promising [1] - There is a commitment to deeply integrate AI technology into game development and operations [1] Regulatory Environment - The company has addressed regulatory risks, which is anticipated to lead to a recovery in its valuation [1]

Core Viewpoint - The gaming industry is experiencing a sustained upward trend, with a solid foundation for valuation recovery, particularly for leading companies like 37 Interactive Entertainment [1] Group 1: Industry Overview - The gaming sector is benefiting from a combination of policy, technology, and capital, creating a new investment window. Since 2025, both domestic and imported game licenses have been issued monthly, leading to a significant increase in supply and boosting market confidence. As of November this year, 1,532 domestic licenses and 92 imported licenses have been issued, marking a substantial year-on-year increase. The total revenue of China's gaming market grew by 7.11% year-on-year in the first three quarters [2][3] - The deep integration of AI technology is reshaping research and operations, driving cost reduction and content upgrades, which further enhances performance expectations for the sector. The ongoing expansion of overseas markets continues to open up growth potential for the industry [2] Group 2: Investment Trends - There is a noticeable trend of funds increasing their holdings in the gaming sector. In Q3 2025, active funds significantly increased their positions in gaming stocks, with 7 out of the top 10 media stocks being gaming companies, indicating that gaming is becoming a primary focus for fund allocation in media [3] - The overall valuation of the gaming sector remains low, with potential for significant upward movement as previous deep adjustments have created a favorable environment for recovery. According to research from Zheshang Securities, the gaming sector is expected to reach a 20x P/E valuation by 2026, compared to the current average of approximately 16x P/E [3] Group 3: Company Spotlight - 37 Interactive Entertainment - 37 Interactive Entertainment exemplifies a strong performer with robust earnings growth, high dividends, and low valuation, making it an attractive investment opportunity. In Q3, the company achieved a net profit of 944 million yuan, a year-on-year increase of 49.24%, surpassing previous expectations [5] - The company has optimized cost efficiency, with a 24% year-on-year decrease in sales expenses, leading to an improved profit outlook. Additionally, 37 Interactive is exploring AI capabilities and expanding its overseas presence, which are expected to contribute to sustainable growth [6] - The company's overseas revenue has grown significantly from 356 million yuan in 2015 to 5.722 billion yuan in 2024, representing an approximate 15-fold increase. In the first half of this year, overseas business accounted for 32.1% of total revenue [6] - 37 Interactive maintains a high dividend payout, with a Q3 cash dividend of 2.10 yuan per 10 shares, totaling 462 million yuan. Combined with previous dividends, the total payout for the year is expected to reach 1.386 billion yuan, representing 59% of net profit, which is significantly higher than the industry average [7] - The current valuation of 37 Interactive is substantially below its historical average and the reasonable valuation of 30x for leading gaming companies, with a PE-TTM of less than 15x and a PB at historical lows, indicating considerable room for valuation recovery [7]

Core Viewpoint - The gaming industry is experiencing a sustained upward trend, with a solid foundation for valuation recovery, particularly for leading companies like 37 Interactive Entertainment [1] Group 1: Industry Overview - The gaming sector is benefiting from a combination of policy, technology, and capital, creating a new investment window. Since 2025, both domestic and imported game licenses have been issued monthly, leading to a significant increase in supply and boosting market confidence. As of November this year, 1,532 domestic licenses and 92 imported licenses have been issued, marking a substantial year-on-year increase. The total revenue of China's gaming market grew by 7.11% year-on-year in the first three quarters [2][3] - The deep integration of AI technology is reshaping research and operations, driving cost reduction and content upgrades, which further enhances performance expectations for the sector. The ongoing expansion of overseas markets continues to open up growth potential for the industry [2] Group 2: Investment Trends - There is a noticeable trend of funds increasing their holdings in the gaming sector. In Q3 2025, active funds significantly increased their positions in gaming stocks, with 7 out of the top 10 media stocks being gaming companies, indicating that gaming is becoming a primary focus for fund allocation in media [3] - The overall valuation of the gaming sector remains low, with potential for significant upward movement as previous deep adjustments have created a favorable environment for recovery. According to research from Zheshang Securities, the gaming sector is expected to reach a 20x P/E valuation by 2026, compared to the current average of approximately 16x P/E [3] Group 3: Company Spotlight - 37 Interactive Entertainment - 37 Interactive Entertainment exemplifies a strong performer with robust earnings growth, high dividends, and low valuation, making it an attractive investment opportunity. In Q3, the company achieved a net profit of 944 million yuan, a year-on-year increase of 49.24%, surpassing previous expectations [5] - The company has optimized cost efficiency, with sales expenses decreasing by 24% year-on-year, leading to an improved profit outlook. Additionally, 37 Interactive is exploring AI capabilities and expanding its overseas presence, which are expected to contribute to sustainable growth [6] - The company's overseas revenue has grown significantly from 356 million yuan in 2015 to 5.722 billion yuan in 2024, representing an approximate 15-fold increase. In the first half of this year, overseas business accounted for 32.1% of total revenue [6] - 37 Interactive maintains a high dividend payout, with a cash dividend of 2.10 yuan per 10 shares announced for Q3, totaling 462 million yuan. The cumulative dividend for the year is expected to reach 1.386 billion yuan, representing 59% of net profit, which is significantly higher than the industry average [7] - The current valuation of 37 Interactive is substantially below its historical average and the reasonable valuation of 30x P/E for leading gaming companies, with a PE-TTM of less than 15x and a PB at historical lows, indicating considerable room for valuation recovery [7]

Core Insights - The article highlights the ongoing trend of Chinese gaming companies successfully expanding into overseas markets, with large firms optimizing classic titles and smaller firms innovating to break through [2][10] - The "Evergreen List" and "Potential Evergreen List" are introduced, showcasing games that have maintained strong performance in international markets [2][10] Group 1: Evergreen Games - In November, 26 games made it to the "Evergreen List," an increase of 3 titles from October, with notable entries including "Gossip Harbor," "PUBG MOBILE," and "Puzzles & Survival" [2][9] - The total estimated revenue for these 26 games in November reached approximately $299 million, equivalent to about 2.11 billion yuan, with 9 games exceeding $10 million in revenue [2][9][10] Group 2: Potential Evergreen Games - The "Potential Evergreen List" features 14 games, with a decrease of 4 titles from October, indicating a competitive landscape [2][10] - "Whiteout Survival" led the list with an estimated revenue of $86.21 million (approximately 609 million yuan) in November, followed by "崩坏:星穹铁道" and "Top Heroes," each surpassing $20 million [10][11] Group 3: Industry Trends and Support - The gaming industry faces challenges due to global economic pressures, but there are supportive policies from various cities in China aimed at facilitating game exports [11] - The adoption of AI technologies is helping to reduce costs and improve efficiency in game development and marketing strategies, providing a more sustainable path for Chinese games in international markets [11]

Market & Product Situation - The game "Survival for 33 Days" by 37 Interactive Entertainment has rapidly climbed the WeChat mini-game sales chart, moving from rank 71 on November 27 to rank 26 by December 7, a rise of 68 positions in just 12 days [1][3][13] - The game is set in a post-apocalyptic world with themes of survival, where players act as survivor leaders to gather companions and build defenses against infected creatures [3][15] - The gameplay features a dual system of "core development + exploration," with character roles such as warrior, tank, support, and ranged, each capable of upgrading and unlocking new skills [3][16] - The game map employs a "fog of war" design, requiring players to meet conditions to unlock new areas, enhancing the sense of exploration and providing clear growth objectives [5][18] - The visual presentation uses a realistic apocalyptic art style, enhancing immersion, while combat effects are designed to maintain engagement without causing visual fatigue [5][18] Marketing Strategy - The advertising strategy for "Survival for 33 Days" began in mid-November with a modest daily ad volume of under 100, which increased significantly by late November [1][9][19] - The main advertising creatives focus on the themes of "survival" and "apocalypse," using straightforward messaging to quickly convey the game's core value [9][22] - The ads include nostalgic elements targeting users from the 80s and 90s, evoking memories of classic survival games, which helps stimulate download interest [9][20] - The marketing approach is characterized by low-key spending, allowing the company to gauge player interest without overwhelming exposure [9][22] Industry Insights - The survival RPG segment is still in a blue ocean phase, with unmet player demand, allowing 37 Interactive Entertainment to differentiate itself from competitors in the crowded survival SLG market [1][10][23] - The successful launch of "Survival for 33 Days" indicates the potential for diverse development within the survival mini-game genre, suggesting future expansions into various sub-genres [1][11][24] - The game has received an APP license, indicating potential for dual-platform operation, which could enhance user engagement and lifecycle value [1][10][23]

Summary of Key Points from the Conference Call Industry Overview - The gaming sector's valuation has reached a lower limit of 15 times, with expectations of maintaining high prosperity and performance growth certainty through 2026, making it an attractive investment opportunity [1][3][25] - The A-share market recommends a "3+2" combination: Giant Network, Kaiying Network, and Century Huatong as stable fundamentals; Gibit and 37 Interactive are positioned lower but showing recent improvements [1][4] Company-Specific Insights Tencent - Expected to launch multiple mid-sized new games in 2026, with a diverse range of genres [7] - Notable titles include "Under One Person," "Rock Kingdom World," and "Monster Hunter Traveler" [7] NetEase - Anticipates additional revenue of 2-3 billion from international IP adaptations and domestic MMO games [2][24] - Key upcoming titles include "Forgotten Sea" and "Infinite," with the former developed by the team behind "Identity V" [7][24] Giant Network - "Famous General Kill" is expected to contribute 200-300 million in profit, with "Supernatural Action Group" potentially increasing annual revenue to 7-8 billion if successful during the Spring Festival [10][12] Kaiying Network - The "Legend Box" platform is driving growth, with DAU expected to reach 650,000 to 700,000 by the end of 2026, and annual advertising revenue projected at around 2.4 billion [10][13] Bilibili - Strong growth in advertising business, with expectations to outperform the overall internet advertising growth rate [21] - Anticipated game revenue growth in the low double digits, with "Three Kingdoms Hundred Generals Card" projected to generate 1-1.5 billion [21] Gibit - Recent performance impacted by a decline in revenue from "Sword of the World," but new game "Nine Mu of the Wild" expected to contribute 1-1.5 billion [19][20] Heart Company - Facing stock price pressure but has potential due to rapid progress in programmatic advertising, with profits expected to reach 150-200 million in 2026 [22] Market Trends and Predictions - The gaming sector is expected to maintain strong growth certainty compared to other sectors, with a focus on identifying high-certainty investment targets [25] - The first quarter of 2026 is anticipated to be stable, with significant product launches concentrated in the summer [11][25] Additional Insights - The competitive landscape is expected to increase in 2026, but companies will focus on their strengths without excessive suppression of smaller firms [11] - The overall sentiment is optimistic for the gaming industry, with a recommendation for investors to strategically select stocks based on performance certainty and market conditions [25]