Summary of Shenzhou Taiyue Conference Call Company Overview - **Company**: Shenzhou Taiyue - **Industry**: Mobile Gaming Key Financial Performance - **2024 Net Profit**: Increased over 60% to 1.428 billion CNY - **2024 Revenue**: Grew by 8.22% to 6.452 billion CNY - **Main Driver**: Sustained performance in mobile gaming, particularly in strategy games (SLG) like "City of the Rising Sun" which has shown continuous revenue growth over five years [2][3][4] Strategic Initiatives - **International Expansion**: The company is committed to an overseas strategy, targeting North American players and planning to launch three new SLG games by the end of this year and early next year, including themes of post-apocalyptic city building and ice age scenarios [2][3][5] - **Policy Environment**: Favorable domestic policies, including regular issuance of game licenses and encouragement for cultural exports, are expected to enhance industry and company valuations [2][3][4] Technological Advancements - **AI Integration**: Significant impact of AI technology on business operations: - 2D production costs reduced by 40% - 3D production costs reduced by 20% - **Software Development**: Focus on creating AI tools, such as "Kai Xiao Cui" for human-machine dialogue, and integrating AI with cloud services to provide deep support for Chinese enterprises going abroad [2][7][11] Business Model Transformation - **Game Art Strategy**: Introduction of AI in game art has reduced reliance on outsourcing and transformed the business model [10] - **Software Services**: Transitioning from project-based software services to online, productized, customizable subscription services, accelerated by AI and cloud technology [11] Market Outlook - **2025 Projections**: Despite a decline in profits in Q1 2025, the company remains optimistic about overall performance, expecting strong growth driven by both new and existing products [12][13] - **New Product Launches**: Plans to release three new SLG games, which are anticipated to significantly boost overall performance [14] Industry Dynamics - **Cultural Export**: The gaming sector is positioned as a key player in China's cultural export strategy, with policies supporting the industry's international expansion [18][19] - **Market Characteristics**: The gaming industry is market-driven, focusing on profitability and adapting to player preferences, particularly in the lucrative SLG market [19][20] Competitive Landscape - **Global Influence**: Chinese mobile games hold a significant share of the global market, particularly in the SLG segment, where they account for approximately 70% [21][22] - **Growth Opportunities**: While overall market growth rates may not be rapidly increasing, there is potential for Chinese companies to capture more market share globally, especially with innovative products [23]

Investment Rating - The industry investment rating is "Positive" (maintained) [2] Core Insights - The report emphasizes the dual growth of AI applications and new IP consumption in the media and internet industry, suggesting a strong investment opportunity in AI and IP sectors [4][31] - The performance of video generation models has significantly improved since 2025, with new tools being released that enhance content creation capabilities across various fields such as e-commerce, advertising, and education [4] - The report highlights the upcoming launches in gaming and variety shows, which are expected to drive revenue growth for related companies [5][34] Summary by Sections Industry Data Overview - "Delta Action" ranked first in the iOS free chart, while "Honor of Kings" topped the iOS revenue chart as of May 10, 2025 [12][16] - The film "Dumpling Queen" achieved a weekly box office of 1.5 billion, with a cumulative box office of 1.77 billion [24] Industry News Overview - AIGC technology is advancing, with significant breakthroughs in video understanding and multi-modal capabilities [31] - Multiple new games are set for public testing, including "Cloud Sea Below" scheduled for May 20, 2025 [34] Company Recommendations - Key recommendations include Tencent Holdings and Kuaishou for AI models and agents, with beneficiaries including Alibaba, Kunlun Wanwei, and SenseTime [4] - In the AI anime and film sector, Shanghai Film is a key recommendation, with beneficiaries including Guomai Culture and Huace Film [4] - For AI education, companies like Century Tianhong and Shengtong Co. are highlighted as beneficiaries [4] Performance Insights - The A-share media sector underperformed compared to major indices, while the sports sector showed better performance [9] - The report suggests closely monitoring the performance of new game and variety show launches for potential revenue impacts on related companies [5]

Core Insights - The gaming industry is witnessing a significant focus on SLG (Simulation and Strategy Games) products, with companies like Shenzhou Taiyue and IGG reporting synchronized growth in revenue and profits from their flagship titles [2][6][10] - Mini-games are emerging as a popular segment, contributing significantly to revenue for companies such as Zhongqingbao and Zhangqu Technology, indicating a shift in consumer preferences [2][24][30] Revenue and Performance - In 2024, 12 games reported annual revenues exceeding 500 million yuan, with 10 games showing year-on-year growth, including titles like "Age of Origins" and "Doomsday: Last Survivors" [6][7] - Shenzhou Taiyue's "Age of Origins" generated 352,915 million yuan in revenue, marking a 7% increase, while "War and Order" also maintained strong performance with over 100 million yuan in revenue [7][8] - IGG's "Kingdom Age" remains a top revenue generator, although its income has declined from 30 billion HKD to nearly 26 billion HKD [11] Marketing and Promotion - Ten games had promotional expenses exceeding 10 million yuan, with "Age of Origins" leading at 66,080 million yuan, representing 19% of its revenue [18][19] - Companies are increasingly focusing on reducing promotional expenditures to enhance profitability, as seen with "Super World" and "War and Order" [20][21] Mini-Game Market - The mini-game market is experiencing rapid growth, with a reported revenue of 39.836 billion yuan in 2024, a 99.18% increase year-on-year [24] - Companies like Xinghui Entertainment and Zhongqingbao are actively investing in mini-games, with titles like "Anti-Japanese Heroes 2" generating significant revenue [30][32] Future Developments - Shenzhou Taiyue is planning to test new SLG titles in the overseas market, indicating a strategic expansion [10] - IGG is also set to launch new SLG projects, aiming for diversified growth in the coming years [12]

Summary of Shenzhou Taiyue's Conference Call Company Overview - **Company**: Shenzhou Taiyue - **Industry**: Mobile Gaming Key Financials - **2024 Total Revenue**: 64.52 billion CNY, up 8.22% YoY - **2024 Net Profit**: 14.28 billion CNY, up over 60% YoY - **2024 Game Revenue**: 46.62 billion CNY, with overseas revenue exceeding 50% - **Key Titles**: "Sunrise City" contributed 34 billion CNY, "War Fire and Order" contributed 10 billion CNY - **Q1 2025 Revenue**: 13.23 billion CNY, with a net profit of 3.29 billion CNY, slightly down YoY due to peak performance in the previous year [2][3] Game Development and Strategy - **New Game Releases**: Plans to launch two new SLG mobile games (code-named DL and LVA) in H2 2025, with three additional SLG games expected by Q2 2026, accelerating release cadence to five games per year [2][5] - **Long-term Strategy**: Commitment to long-term operation of SLG games, anticipating stable revenue and profit from new titles [2][5] - **Market Focus**: 50% of game revenue comes from North America, primarily the U.S. [4][11] Business Segments - **Server Cluster Business**: Achieved breakeven last year, expected to improve further this year [6] - **Cloud and AI Services**: Integration of cloud and AI services aimed at supporting Chinese companies going global, serving over 300 clients [6][17] - **SaaS Revenue**: Accounts for approximately 40%-50% of cloud business revenue, with double-digit growth in recent years [17] Regulatory and Market Environment - **Government Policies**: Encouragement of game exports positively impacts business development and improves market sentiment, increasing industry valuation confidence [7] - **U.S. Court Ruling**: Monitoring the ruling allowing bypassing Apple's iOS store for payments, which could reduce costs and enhance profitability [8] Game Performance Insights - **"Sunrise City"**: Revenue fluctuated significantly in 2024 due to competition, with a focus on ROI leading to reduced marketing spend [9] - **"War Fire and Order"**: Maintained stable revenue performance [9] Future Outlook - **2025 Revenue and Profit Projections**: Dependent on the performance of key products and new releases, with a focus on maintaining revenue stability and effective marketing strategies [18] - **Governance Structure**: Highlighted as a strong foundation for future growth [19] Additional Notes - **Art Production Costs**: Art production accounts for about 40% of game development costs, with improved third-party tools enhancing efficiency [16] - **Non-SLG Game Development**: Exploring non-SLG products while maintaining focus on core SLG offerings [13] This summary encapsulates the key points from the conference call, providing insights into Shenzhou Taiyue's financial performance, strategic direction, and market environment.

Group 1 - The core viewpoint highlights the significant growth and investment interest in the Artificial Intelligence ETF, which has reached a new high in scale and liquidity, indicating strong market confidence in the AI sector [3][4] - The Artificial Intelligence ETF has recorded a turnover of 3.06% during trading, with a transaction volume of 106 million yuan, and its latest scale has reached 3.403 billion yuan, marking a one-year high [3] - Over the past seven trading days, the Artificial Intelligence ETF has seen net inflows on four occasions, totaling 232 million yuan, with an average daily net inflow of approximately 33.08 million yuan [3] Group 2 - Leverage funds are increasingly being allocated to the Artificial Intelligence ETF, with the latest margin buying amounting to 18.716 million yuan and the latest margin balance reaching 132 million yuan [3] - The Guangdong provincial government has issued measures to stimulate market vitality and accelerate the construction of a modern industrial system, emphasizing the development of AI applications in various sectors [3] - The recent political bureau meeting underscored the investment value of the computer industry, particularly in the AI sector, indicating government support and signaling new development opportunities in AI, robotics, and other related fields [3]

Market Overview - The Shanghai Composite Index is at 3305.11 points, above the annual line, with an increase of 0.80% [1] - The total trading volume of A-shares is 646.819 billion yuan [1] Stocks Breaking Annual Line - A total of 233 A-shares have surpassed the annual line today [1] - Notable stocks with significant deviation rates include: - Jinkai Biological Science and Technology (10.11%) - Disen Power (9.84%) - Hanbo High-tech (8.84%) [1] Stock Performance Details - The top stocks with their respective performance metrics are as follows: - Jinkai Biological: Price increased by 10.32%, turnover rate 13.55%, latest price 33.02 yuan [1] - Disen Power: Price increased by 10.04%, turnover rate 1.77%, latest price 4.93 yuan [1] - Hanbo High-tech: Price increased by 9.42%, turnover rate 3.54%, latest price 15.33 yuan [1] - Other notable stocks include: - Jiashitang (9.97%, 3.57%, 13.13 yuan) - Sanmu Group (9.94%, 7.78%, 3.54 yuan) [1] Additional Stocks with Minor Deviations - Stocks with smaller deviation rates that have just crossed the annual line include: - Yongqing Environmental Protection - Dongjian Technology - Aishide [1]

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Investment Rating - The report maintains a "Strong Buy" investment rating for the company [3][7]. Core Views - The company achieved significant growth in net profit for 2024, with a year-on-year increase of 60.92%, driven by effective marketing strategies in its gaming business and stable growth in software and IT services [7]. - Despite a decline in revenue and profit in Q1 2025, the company has a robust pipeline of new products in the SLG (Simulation and Strategy Game) sector, which are expected to perform well [7]. - The use of AIGC tools is enhancing operational efficiency and user experience in the software and IT services segment [7]. - The revenue forecast for 2025-2027 is adjusted to 71.30 billion, 77.00 billion, and 82.39 billion yuan, with corresponding net profits of 12.69 billion, 13.62 billion, and 14.36 billion yuan [7]. Financial Performance - In 2024, the company reported total revenue of 64.52 billion yuan, an increase of 8.22% year-on-year, and a net profit of 14.28 billion yuan, reflecting a growth of 60.92% [1][7]. - For Q1 2025, the company recorded a revenue of 13.23 billion yuan, a decrease of 11.07% year-on-year, and a net profit of 2.39 billion yuan, down 19.09% [1][7]. - The company plans to distribute a cash dividend of 1 yuan per 10 shares for the 2024 fiscal year, amounting to approximately 1.96 billion yuan [1]. Key Financial Metrics - The company has a total market capitalization of 21.5 billion yuan and a circulating market value of 19.9 billion yuan [3]. - The return on equity (ROE) stands at 18.9%, with a debt-to-asset ratio of 11.0% [3]. - The projected earnings per share (EPS) for 2025 is 0.65 yuan, with a price-to-earnings (PE) ratio of 16.9 [8].

Core Insights - A-share gaming companies showed mixed performance in Q1 2025, with some recovering from previous downturns while others faced declines in revenue and profit [2][3] Group 1: Company Performance - ST Huatuo achieved the highest revenue and net profit among A-share gaming companies in Q1 2025, with revenue of 81.45 billion yuan, a year-on-year increase of 91.12%, and net profit of 13.5 billion yuan, up 107.2% [3][4] - Perfect World rebounded with Q1 revenue of 20.23 billion yuan, a 52.22% increase, and net profit of 3.02 billion yuan, marking an over 11-fold increase compared to the previous year [5] - 10 companies reported both revenue and net profit growth, while 9 companies, including Dazheng Culture and ST Zhongqingbao, saw declines in both metrics [2][6] Group 2: Market Trends - The gaming industry is experiencing a positive trend due to the increasing issuance of game licenses and a stronger focus on high-quality game development [2][4] - New game launches, overseas expansion, and mini-program games are key factors influencing the performance of A-share gaming companies [2][4] Group 3: Challenges Faced - Companies like 37 Interactive Entertainment and Shenzhou Taiyue reported declines in revenue and net profit, with 37 Interactive's revenue falling by 10.67% to 42.43 billion yuan [6][7] - ST Zhongqingbao has faced continuous losses for five years, with Q1 2025 revenue dropping by 34.19% to 49.27 million yuan and net loss widening to 11.73 million yuan [9]

Investment Rating - The report maintains a positive investment rating for the media and entertainment sector, particularly highlighting leading companies such as Shenzhou Taiyue, Southern Media, and Tencent Holdings [1][2]. Core Insights - The media sector has shown resilience with a slight increase of 0.14% in the past week, ranking 22nd among all sectors, while year-to-date performance is up by 0.30%, placing it 9th overall [1]. - The publishing industry is experiencing a rebound, with companies like Southern Media and Phoenix Media exceeding market expectations, driven by stable cash flow from educational materials [1]. - The film industry is expected to benefit significantly from the success of "Nezha 2," with companies like Wanda Film anticipated to see substantial growth [1]. - The gaming sector is also highlighted for its strong performance, supported by favorable valuations, growth rates, and the impact of AI development [1][2]. Summary by Sections Media Sector Performance - The media industry index increased by 0.14% in the last week, with notable individual stock performances, including significant gains from companies like Xingyibao and Hengdian Film [10][12]. - The publishing sector is characterized by stable cash flows and attractive valuations, with many companies trading at around 10 times earnings and offering dividend yields of approximately 4% [1][2]. Film and Television Insights - The top films in the box office include "Nezha: The Devil Child," which grossed 51.69 million, and "The Hunt," with a box office of 17.18 million [17][18]. - Upcoming films are expected to attract significant audience interest, with "The Kowloon Walled City" leading in pre-release interest [19]. Gaming Sector Highlights - Tencent dominates the mobile gaming market, with seven titles in the iOS top ten, including "Honor of Kings" at the top position [30][31]. - The gaming industry is benefiting from AI advancements, enhancing operational efficiencies and advertising capabilities [2]. Publishing and Literature Trends - The top-selling fictional books include "Nezha: The Three Realms' Past" and "To Live (2021 Edition)," indicating strong consumer interest in literary works [32][33]. - The report notes a diverse range of successful titles across various genres, reflecting a robust publishing market [32][33].