Core Viewpoint - Perfect World has shown a significant increase in stock price and financial performance, indicating strong growth potential in the gaming and entertainment industry [1][2]. Financial Performance - As of June 30, 2025, Perfect World achieved a revenue of 3.691 billion yuan, representing a year-on-year growth of 33.74% [2]. - The net profit attributable to shareholders reached 503 million yuan, marking a substantial increase of 384.52% compared to the previous year [2]. - The company has distributed a total of 5.543 billion yuan in dividends since its A-share listing, with 1.976 billion yuan distributed over the past three years [2]. Stock Market Activity - On September 5, 2023, Perfect World’s stock price rose by 2.06% to 15.34 yuan per share, with a trading volume of 156 million yuan and a turnover rate of 0.57% [1]. - The stock has increased by 51.81% year-to-date, although it has seen a decline of 7.92% over the last five trading days [1]. - The company’s total market capitalization is approximately 29.759 billion yuan [1]. Shareholder Structure - As of June 30, 2025, the number of shareholders decreased by 11.69% to 102,100, while the average number of circulating shares per person increased by 13.24% to 17,893 shares [2]. - The second-largest shareholder is Hong Kong Central Clearing Limited, holding 116 million shares, an increase of 52.636 million shares from the previous period [2]. - Other notable shareholders include XINGQUAN He Run Mixed A and Huaxia Zhongzheng Animation Game ETF, with varying changes in their holdings [2]. Company Overview - Perfect World Co., Ltd. is based in Beijing and was established on August 27, 1999, with its shares listed on October 28, 2011 [1]. - The company specializes in the development, publishing, and operation of online games, as well as film and television production and related services [1]. - It operates within the media and gaming industry, with concepts including the Metaverse, virtual digital humans, and artificial intelligence [1].

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 - On September 5, the gaming sector rose by 3.31%, led by Giant Network, while the Shanghai Composite Index closed at 3812.51, up 1.24% [1] - The Shenzhen Component Index closed at 12590.56, increasing by 3.89% [1] Individual Stock Performance - Giant Network (002558) closed at 38.39, with a gain of 9.25% and a trading volume of 530,800 shares [1] - Yaoji Technology (002605) closed at 29.18, up 6.07%, with a trading volume of 332,900 shares [1] - Star Shine Entertainment (300043) closed at 5.30, increasing by 5.58%, with a trading volume of 1,025,900 shares [1] - Perfect World (002624) closed at 15.85, up 5.46%, with a trading volume of 707,400 shares [1] - ST Huaton (002602) closed at 16.54, gaining 5.02%, with a trading volume of 1,673,600 shares [1] - Other notable performers include Baotong Technology (300031) and Kaiying Network (002517), both showing gains of 4.11% [1] Capital Flow Analysis - The gaming sector saw a net inflow of 246 million yuan from institutional investors, while retail investors experienced a net outflow of 200 million yuan [2] - Major stocks like Three Seven Interactive (002555) had a net inflow of 2.35 billion yuan from institutional investors, despite a net outflow from retail investors [3] - Yaoji Technology (002605) also saw significant institutional inflow of 152 million yuan, with retail outflows of 78 million yuan [3] ETF Performance - The Gaming ETF (product code: 159869) tracking the China Animation and Gaming Index saw a slight decline of 0.88% over the past five days, with a net inflow of 445,000 yuan [5] - The Food and Beverage ETF (product code: 515170) had a minor increase of 0.33%, with a net outflow of 2.34 million yuan [5]

Core Insights - The total box office for the summer season of 2025 reached 11.966 billion yuan, marking a year-on-year increase of 2.76%, with total audience attendance hitting 321 million, up 12.75% compared to the previous year, making it the second highest in the last five years for summer attendance [1] - Domestic films accounted for 76.21% of the box office during this period, with 19 films surpassing 100 million yuan in box office revenue [1] - Guangdong province maintained its position as the "first box office" in the country for the third consecutive year, achieving a summer box office of 1.599 billion yuan, a 7.6% increase year-on-year, and audience attendance exceeding 41.62 million, up approximately 17% [1] Industry Initiatives - The Guangdong Film Bureau organized various film exhibition activities, including the "Guangdong Art Film Exhibition - Touching Theater" and the 2025 Guangdong-Hong Kong-Macao Greater Bay Area Animation Film Week, alongside a summer movie subsidy program providing 12 million yuan to enhance audience engagement [2] - The province is promoting a "movie+" consumption model, integrating film with tourism, food, and sports, and launched activities like "Follow the Movie to the Market," which included the release of 56 tourism routes and electronic guides [2] Policy Support - Guangdong introduced the "Several Policy Measures for Promoting High-Quality Development of the Guangdong Film Industry" (referred to as "15 Policies"), which supports all aspects of film production, including creation, screening, and distribution, receiving positive feedback from the industry [3] - Following the implementation of these policies, several major film companies have established operations in Guangdong, and numerous film projects reflecting Lingnan culture and contemporary themes have been initiated [3]

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.

Group 1 - The core point of the news is that Perfect World experienced a decline in stock price, dropping by 5.02% to 14.95 CNY per share, with a trading volume of 780 million CNY and a turnover rate of 2.78%, resulting in a total market capitalization of 29.003 billion CNY [1] - Perfect World Co., Ltd. is based in Beijing and was established on August 27, 1999. It was listed on October 28, 2011. The company's main business includes the development, publishing, and operation of online games, as well as the production and distribution of films and TV series, and artist management services [1] Group 2 - From the perspective of fund holdings, one fund under Agricultural Bank of China Asset Management has a significant position in Perfect World. The fund, Agricultural Bank of China Ruiyi One-Year Holding Mixed A (020354), held 9,000 shares in the second quarter, accounting for 0.29% of the fund's net value, making it the fifth-largest holding [2] - The Agricultural Bank of China Ruiyi One-Year Holding Mixed A fund was established on January 24, 2024, with a latest scale of 25.5926 million CNY. Year-to-date returns are 2.41%, ranking 7335 out of 8180 in its category, while the one-year return is 4.4%, ranking 7551 out of 7978 [2] - The fund manager Liu Shasha has a tenure of 11 years and 6 days, with a total fund asset size of 1.07 billion CNY. During her tenure, the best fund return was 27.22%, and the worst was -1.59%. Co-manager Qian Daqian has a tenure of 2 years and 258 days, with a total fund asset size of 1.067 billion CNY, achieving a best return of 30.22% and a worst return of -0.12% during his tenure [2]

Investment Rating - The report maintains a "Buy" rating for the company, with a target price of 16.20 CNY based on a 20x PE for 2026 [5][3]. Core Views - The company's core game "Yihuan" is expected to launch in 2026, contributing significantly to revenue growth. The forecasted net profit for the company is 0.827 billion, 1.564 billion, and 1.806 billion CNY for 2025, 2026, and 2027 respectively, reflecting a recovery in profitability [3][10]. - The company has seen a strong performance in its existing games, particularly "Zhu Xian World," which has driven revenue growth in the first half of 2025 [10]. Financial Summary - The company's revenue for 2023 is projected at 7.791 billion CNY, with a year-on-year growth of 1.6%. However, a decline of 28.5% is expected in 2024, followed by a recovery with growth rates of 29.1% and 48.6% in 2025 and 2026 respectively [4][12]. - The gross profit margin is expected to stabilize around 58.2% in 2025 and increase to 63.9% in 2026, indicating improved profitability as new games are launched [4][12]. - The net profit margin is projected to recover from -23.1% in 2024 to 14.6% in 2026, reflecting a significant turnaround in the company's financial health [4][12].