BABA(US:BABA) Shenwan Hongyuan Securities·2025-12-14 09:43Investment Rating - The industry investment rating is "Overweight," indicating a positive outlook for the internet sector, particularly in AI applications and consumer engagement [3][11]. Core Insights - The report highlights the competition for consumer-facing AI interfaces, with significant developments from ByteDance and Alibaba. ByteDance's upcoming conference will focus on the performance and pricing of its Doubao model, while Alibaba has restructured its C-end business group to enhance its AI capabilities [3]. - The report recommends investing in Giant Network and 37 Interactive Entertainment due to their strong growth potential in the gaming sector, particularly targeting young female consumers [3]. - The advertising sector, particularly Focus Media, is noted for its ongoing mergers and high dividend support, with expectations of continued investment from internet companies [3]. Summary by Sections AI Competition - ByteDance is focusing on the Doubao model's performance and pricing, with its AI mobile phone already integrated into various services. However, challenges remain regarding privacy and competition with super apps [3]. - Alibaba's new C-end business group aims to develop its Qianwen app into a super app and expand its AI assistant capabilities across multiple platforms [3]. Gaming Sector - Giant Network is expected to see significant growth with its upcoming game "Supernatural Action," while 37 Interactive Entertainment is entering a profit recovery phase with a projected net profit of 3.21 billion yuan for 2025 [3]. - The report emphasizes the potential of the young female gaming market and the undervaluation of companies with strong daily active user products [3]. Advertising Sector - Focus Media's merger with New Wave is progressing, expected to enhance its bargaining power within the industry. The company is also benefiting from increased investment in local life services and AI applications [3]. - The report notes that despite macroeconomic challenges, Focus Media has shown strong operational efficiency and profitability [3]. Valuation Overview - A detailed valuation table is provided, showcasing key companies in the gaming and entertainment sectors, including Tencent, Giant Network, and 37 Interactive Entertainment, with projected revenue and profit growth rates [5].