Summary of the Conference Call for Giant Network Company Overview - **Company**: Giant Network - **Industry**: Gaming Key Points and Arguments Performance of "Supernatural Action Group" - "Supernatural Action Group" has shown significant improvement in the iOS sales rankings from June to August, reaching a peak of 100 million concurrent users in July and maintaining a top five position in the iOS free chart [2][3] - The game ranked around 52nd, 22nd, and 12th in the iOS sales chart during June, July, and August respectively, and improved to around 11th after the launch of "Escape from Horror" in September [4][5] - The upcoming "Monster Farm" is expected to further increase online user engagement and revenue during the National Day holiday [2][5] Future Product Pipeline - In addition to "Supernatural Action Group," Giant Network has several upcoming titles, including "Ming Jiang Sha" and "5,000 Years," which are set to launch between 2026 and 2027, potentially driving revenue growth [2][6] - The company is actively integrating AI technology into its games, enhancing user experience and engagement through innovative features [6][9] Market Expectations and Valuation - Market expectations for Giant Network's performance in 2025 and 2026 have been continuously revised upward due to the strong performance of "Supernatural Action Group" [7][8] - The company's valuation is expected to rise as "Supernatural Action Group" becomes a leading long-term game, alongside the launch of other products [8] AI Integration and Innovations - Giant Network has made significant strides in integrating AI with gaming, enhancing player engagement and retention through features like the Deepseek R1 model in its core product [9] - The introduction of AI-driven gameplay mechanics has led to increased player activity, session length, and revenue growth [9] Key Factors Influencing Future Performance - Future performance and stock price are influenced by the ongoing updates and innovations in "Supernatural Action Group," as well as the impact of "Monster Farm" and upcoming holiday events [10][11] - The successful testing and launch of new products like "Ming Jiang Sha" will also play a crucial role in the company's long-term growth and valuation [11][13] Current Market Position - Despite recent stock price fluctuations, Giant Network remains in a growth phase, with new product performances expected to drive significant revenue revisions [12][13] Additional Important Insights - The company is focusing on maintaining a robust product pipeline and leveraging AI to enhance gaming experiences, which are critical for sustaining growth in a competitive market [6][9] - Investors are encouraged to monitor the performance of new products and their potential impact on revenue and market valuation [12][13]

Summary of Key Takeaways from Citi's 2025 China Online Gaming Tour Industry Overview - The report focuses on the **China Online Gaming** industry, highlighting key players such as **Century Huatong**, **Giant Network**, **G-Bits**, and **Kingnet**. Key Company Insights Century Huatong - **Century Games** has emerged as a leading player in the casual strategy gaming sector, with monthly grossing between **US$350-400 million** driven by innovative content and effective traffic acquisition strategies [2][14]. - The company has a high product hit rate, with successful titles like **Whiteout Survival** and **Kingshot**, contributing to an extended profit growth cycle expected until **2028-29** [1][20]. - Management expects **incremental IP licensing revenues** to begin in **3Q25**, further enhancing profitability [23]. Giant Network - **Supernatural Action** is positioned as a potential large DAU title, with over **2 hours** of average daily time spent per user, driven by frequent content updates and a strong female gamer demographic [3][30]. - The game has achieved a grossing of over **RMB 500 million** in August, indicating strong user engagement [30]. - Management emphasizes the importance of social attributes and game quality over heavy traffic acquisition costs, achieving a **20%** traffic acquisition cost relative to grossing [31]. G-Bits - G-Bits is focusing on expanding its market presence in **Hong Kong, Macau, Taiwan, Japan**, and exploring Western and Korean markets [4]. - The company plans to launch **Wen Jian Chang Sheng** in **2H25**, with a focus on cultural adaptation for different markets [46]. - G-Bits maintains a shareholder return policy with a **70%+** earnings payout, supported by a strong cash position of over **RMB 4 billion** [54]. Kingnet - Kingnet has established three core business pillars: distribution, development of innovative games, and investment in IP [58]. - The upcoming renewal of the **Chuanqi IP** on **September 19** is expected to boost information services revenues significantly [60][65]. - Kingnet is also investing in AI initiatives, including the launch of an AI companion application, **EVE**, which has shown promising retention rates during testing [66][67]. Industry Trends and Outlook - The gaming industry is experiencing **structural tailwinds** such as favorable policy support and improved execution capabilities, with increasing interest in how AI is reshaping the sector [6]. - Despite rising traffic acquisition costs, companies are focusing on enhancing game quality and leveraging AI to improve operational efficiency [53][68]. - The overall sentiment among investors is positive, with expectations of continued growth and profitability across the sector, particularly for companies like Century Huatong and Giant Network [25][38]. Additional Insights - The report indicates a competitive landscape where companies are increasingly focusing on **user engagement** and **content innovation** to maintain market share [17][32]. - Management teams across these companies emphasize the importance of adapting to market demands and leveraging data analytics for better decision-making [52][70]. This summary encapsulates the key points from the Citi's 2025 China Online Gaming Tour, providing insights into the performance and strategies of leading companies in the industry.

Market Overview - On September 18, the gaming sector declined by 1.56%, with Xinghui Entertainment leading the drop [1] - The Shanghai Composite Index closed at 3831.66, down 1.15%, while the Shenzhen Component Index closed at 13075.66, down 1.06% [1] Individual Stock Performance - Xinghui Entertainment (300043) closed at 7.17, down 6.88%, with a trading volume of 2.0662 million shares and a turnover of 1.518 billion yuan [2] - Other notable declines include: - Shenzhou Taiyue (300002) down 4.95% to 14.20 with a turnover of 1.763 billion yuan [2] - Bingchuan Network (300533) down 4.55% to 40.52 with a turnover of 994 million yuan [2] - Conversely, Xunyou Technology (300467) saw an increase of 5.61%, closing at 27.10 with a turnover of 927 million yuan [1] Capital Flow Analysis - The gaming sector experienced a net outflow of 1.72 billion yuan from major funds, while retail investors contributed a net inflow of 1.439 billion yuan [2] - Speculative funds saw a net inflow of 281 million yuan into the gaming sector [2]

Group 1 - The gaming sector has shown strong performance recently, driven by new product release expectations and industry recovery, with the gaming ETF (159869) gaining nearly 1.5% [1] - Major stocks in the gaming ETF include Xunyou Technology (300467) leading with over 10% increase, followed by Beiwai Technology (002148) with nearly 6% rise, and others like Kaiying Network (002517), G-bits (603444), Baotong Technology (300031), and Giant Network (002558) also showing significant gains [1] - The gaming ETF has seen a net inflow of funds for two consecutive days, accumulating a total of 5.92 billion yuan [1] Group 2 - In the first half of 2025, the gaming sector achieved revenue of 54.452 billion yuan, a year-on-year increase of 22.17%, with net profit rising 74.95% to 8.052 billion yuan [2] - The profit increase is attributed to leading companies like Perfect World (002624) focusing on core product operations and self-developed IP iterations, alongside contributions from hit games and new game version updates [2] - The overall profitability of the gaming sector improved, with gross margin and net margin rising by 0.37 percentage points and 4.13 percentage points to 67.80% and 14.74%, respectively [2] Group 3 - Wanlian Securities notes that the media sector's overall performance is recovering, with significant improvement in the gaming sector's performance in Q2 2025 [3] - The long-term outlook for the industry is positive, with expectations of recovery in industry prosperity driven by gradual restoration of content supply, deepening AI technology empowerment, policy support, and consumer recovery [3] - Companies in the film and television industry, as well as those in the gaming sector showing strong performance, are recommended for attention, along with those involved in digital assets and AIGC-related technologies [3]

Group 1 - The Nasdaq China Golden Dragon Index rose by 2.85%, with notable increases in stocks such as Baidu (up over 11%) and NIO (up over 6%) [1] - The CSI Hong Kong-Shenzhen Online Consumption Theme Index (931481) increased by 0.90%, with significant gains from stocks like Ping An Good Doctor (up 3.82%) and Perfect World (up 3.79%) [1] - The Online Consumption ETF (159793) rose by 1.89%, closing at 1.18 yuan, and has seen a cumulative increase of 5.44% over the past week [1] Group 2 - As of August 29, 2025, the top ten weighted stocks in the CSI Hong Kong-Shenzhen Online Consumption Theme Index accounted for 51.84% of the index, including Tencent Holdings and Alibaba [2] - The top ten stocks by weight include Tencent Holdings (9.65%), Alibaba-W (9.25%), and Meituan-W (8.37%) [4]

Group 1 - The gaming sector experienced a significant rally on September 18, with Xunyou Technology rising over 10% [1] - Giant Network and 37 Interactive Entertainment both saw increases of over 3% [1] - Perfect World and Jiayuan Technology also followed the upward trend [1]

Group 1: Industry Performance - The gaming industry index closed up 2.13% on September 17, with key stocks like Kaiying Network rising by 9.01% and others like Giant Network and Xunyou Technology increasing by over 4% [1] - Year-to-date, the gaming industry index has increased by 82.61%, ranking third among all Shenwan secondary industries, making it one of the best-performing sectors this year [1] - Six gaming stocks have doubled in price compared to the end of last year, with ST Huatuo, Giant Network, and 37 Interactive Entertainment showing significant cumulative increases of 286.19%, 261.23%, and 157.39% respectively [1] Group 2: Market Growth - The gaming market revenue reached 1970.84 billion yuan from January to July 2025, marking a year-on-year growth of 12.58% [2] - Projected revenues for the gaming market from 2022 to 2024 are 2658.84 billion yuan, 3029.64 billion yuan, and 3257.83 billion yuan respectively, indicating robust growth potential [2] Group 3: Esports Development - The esports industry in China generated 127.61 billion yuan in revenue from January to June 2025, reflecting a year-on-year increase of 6.1% [4] - The Chinese esports industry is expanding its influence overseas, particularly in regions like Latin America, alongside traditional markets in East and Southeast Asia [4] Group 4: Supply and User Growth - The steady growth in industry revenue is attributed to the continuous release of new games, with a noticeable reduction in the approval cycle for game licenses [5] - As of June 2025, the number of online game users in China reached 584 million, an increase of 26.92 million from December 2024, representing 52% of the total internet users [7] - The proportion of female gamers has risen to 48%, up by 3.1 percentage points from the end of 2024, contributing to market expansion and innovation [7] Group 5: International Expansion - The overseas business revenue of 20 A-share gaming companies reached 21.823 billion yuan in the first half of 2025, a year-on-year increase of 30.43% [9] - Notably, ST Huatuo, Kunlun Wanwei, and 37 Interactive Entertainment reported overseas revenues exceeding 1 billion yuan, with ST Huatuo achieving 89.58 billion yuan, accounting for 52.06% of its total revenue [10]

Market Overview - On September 17, the gaming sector rose by 2.02%, with Kaiying Network leading the gains [1] - The Shanghai Composite Index closed at 3876.34, up 0.37%, while the Shenzhen Component Index closed at 13215.46, up 1.16% [1] Individual Stock Performance - Notable gainers included: - Xinying Network (002517) with a closing price of 28.06, up 9.01% and a trading volume of 563,800 shares, totaling 1.514 billion yuan [1] - Giant Network (002558) closed at 45.38, up 4.49% with a trading volume of 459,700 shares, totaling 2.076 billion yuan [1] - Xunyou Technology (300467) closed at 25.66, up 4.44% with a trading volume of 180,400 shares, totaling 453 million yuan [1] Fund Flow Analysis - The gaming sector experienced a net outflow of 637 million yuan from institutional investors, while retail investors saw a net inflow of 330 million yuan [2][3] - Key stocks with significant fund flows included: - Shenzhou Taiyue (300002) with a net inflow of 141 million yuan from institutional investors [3] - Perfect World (002624) saw a net inflow of 95.9 million yuan from institutional investors [3] ETF Performance - The Gaming ETF (159869) tracking the China Animation and Gaming Index saw a 4.78% increase over the past five days, with a net outflow of 44.875 million yuan [5] - The Food and Beverage ETF (515170) experienced a decline of 1.63% over the past five days, with a net outflow of 17.845 million yuan [5]

Group 1 - The A-share market's online gaming sector experienced a significant upward trend, with notable stocks such as Beiwai Technology hitting the daily limit, and Kaiying Network approaching the daily limit while reaching a new high [1] - Giant Network saw an increase of over 4%, indicating strong performance within the sector [1] - Other companies including Xunyou Technology, Shenzhou Taiyue, Iceberg Network, Perfect World, and 37 Interactive Entertainment also showed positive movement, contributing to the overall growth of the online gaming sector [1]

Investment Rating - The investment rating for the media industry is "Outperform the Market" (maintained) [1] Core Viewpoints - The media industry is experiencing a recovery in net profits, driven by a low base effect from the previous year and a significant decrease in expenses [2][18] - The gaming sector is showing strong growth due to a new product cycle, while the film and television sector is expected to see a bottom reversal supported by policy changes [5][60] Summary by Sections 1. Performance Review: Significant Recovery in Net Profit - In the first half of 2025, the A-share media sector achieved a total revenue of 254.9 billion yuan and a net profit of 21.8 billion yuan, representing year-on-year growth of 4.06% and 28.70% respectively [2][18] - The gross margin increased by 0.9 percentage points to 32.90%, and the net margin improved by 1.7 percentage points to 8.65% [19][29] 2. Q2 Performance Continues Upward Trend - In Q2 2025, the media sector reported revenues of 129.1 billion yuan and a net profit of 10.7 billion yuan, with year-on-year growth of 2.59% and 19.53% respectively [3][49] - The gaming sector's net profit saw a significant improvement, driven by new game launches [3][74] 3. Subsector Performance: Gaming Sector Achieves High Growth - The gaming sector generated revenues of 27.7 billion yuan and a net profit of 4.6 billion yuan in Q2 2025, with year-on-year growth of 22.40% and 104.47% respectively [4][74] - The film and television sector faced challenges, with revenues declining by 21.7% and net profit turning negative [4][60] 4. Investment Recommendations: Focus on Gaming and Film Sectors - The report recommends focusing on gaming companies benefiting from a strong new product cycle and film companies poised for recovery due to favorable policies [5][60] - Specific stock recommendations include Giant Network, Bilibili, Mango Excellent Media, and Light Media [5][60]