Giant Network(SZ:002558) Shenwan Hongyuan Securities·2025-11-30 07:41Investment Rating - The industry investment rating is "Overweight," indicating a positive outlook for the sector compared to the overall market performance [5][22]. Core Insights - The report highlights that core consumer brands in the gaming and entertainment sectors, such as Giant Network, Huatuo, and Bubble Mart, have reached a price-to-earnings (PE) ratio of less than 20x for 2026, providing a significant safety margin. The structural consumption dividend from young domestic users willing to pay for enjoyment remains intact, suggesting a favorable investment opportunity at this time [5][6]. Summary by Relevant Sections Gaming Sector - The gaming industry is experiencing a demographic shift with Generation Z users accounting for 65% of the market. The potential of female-oriented gaming segments is still underestimated. The overseas market expansion is expected to unlock further growth potential. The report emphasizes the resilience of leading companies in managing product cycles and suggests focusing on Giant Network, which has a strong daily active user (DAU) base and potential for IP development [6][7]. Trendy Toys - Bubble Mart is viewed as having overly pessimistic expectations regarding single IPs. The expansion of IPs and geographical reach (especially in Europe and North America) is seen as a cornerstone for mid-term growth. The company has 171 overseas stores, with significant room for growth in North America and Europe. The report anticipates that the upcoming holiday season will boost sales and social engagement for new IPs [7][8]. Music Sector - The valuation of Tencent's music companies is projected to average a PE of 17x for 2026. The demand for subscription-based music services among young users is stable, and the report suggests that the market is currently undervaluing this segment. It notes a clear segmentation in music consumption, with Tencent focusing on premium content and community engagement, while competitors like Soda Music target the low-cost segment [8][9]. Other Entertainment Companies - The report mentions that companies like Red Child City are expected to show high growth with low PE ratios. The Hong Kong internet sector is also highlighted, with Alibaba Cloud validating AI narratives and anticipating growth from AI applications and chip production [9][10]. AI and Technology Integration - The report discusses the integration of AI in various applications, including advertising and video content. Companies like Tencent and Alibaba are working on enhancing their chatbot capabilities to create a more integrated ecosystem for advertising, e-commerce, and lifestyle services. The potential for AI applications in gaming and robotics is also noted for the years 2026-2027 [10][11].