Shenwan Hongyuan Securities·2025-06-03 03:33Investment Rating - The report maintains a positive outlook on the gaming sector, recommending high-odds gaming stocks, particularly highlighting the strong performance of Giant Network's "Supernatural Action Group" [4]. Core Insights - The gaming industry exhibits a clear supply-driven demand characteristic, with an extended lifecycle for evergreen games and enhanced differentiation leading to improved profit margins. The gaming sector's current PE valuation is at a low midpoint of 15x, with expectations for EPS and PE uplift due to favorable policies and a new product cycle [4]. - The report emphasizes the potential of various companies, including G-bits, Xindong Company, and Shenzhou Taiyue, which are expected to benefit from the expansion of game licenses and new product launches [4]. - The report also highlights the anticipated entry of Blukoo into the Hong Kong Stock Connect, focusing on emotional consumption sectors such as music, concerts, and collectibles [4]. Summary by Sections Gaming Sector - The gaming sector is characterized by low valuations and high potential returns, with a PE ratio of 15x. The first quarter of 2025 saw many gaming companies in both Hong Kong and A-shares outperform expectations [4][6]. - Key companies to watch include Tencent Holdings, NetEase, and Giant Network, with projected revenue growth rates of 11% to 21% for 2025 [6]. Emotional Consumption - Companies like Blukoo and NetEase Cloud Music are highlighted for their growth potential, with Blukoo focusing on expanding its user base among women and older demographics [4]. - NetEase Cloud Music is noted for its steady growth in paid users and improved bargaining power, contributing to revenue and gross margin increases [4]. Film and Entertainment - Alibaba Pictures is shifting focus to live entertainment and IP derivatives, with a projected revenue growth of 38.8% for FY25 [4]. - The report also mentions the potential for valuation recovery in companies like Maoyan Entertainment, which has several upcoming projects [4]. AI and Cloud Computing - The report indicates a low market expectation for AI applications, despite ongoing advancements in the industry. Companies like Tencent and Alibaba are recommended for their strong positions in AI cloud computing and applications [4]. Key Recommendations - The report recommends focusing on companies that cater to emotional consumption, such as Bubble Mart, Blukoo, and NetEase Cloud Music, as well as low-valuation gaming stocks like Giant Network and Perfect World [4]. - It also suggests monitoring companies with improved competitive dynamics and high dividends, such as Focus Media [4].