Investment Rating - The industry investment rating is maintained at "Overweight" [1] Core Insights - The gaming sector continues to attract attention, with a recommendation to buy [3] - The normalization of game license issuance reflects ongoing regulatory support for the gaming industry, with 1,195 domestic game licenses issued from January to September 2025, a year-on-year increase of 24.61% [3] - The domestic gaming market revenue in August 2025 was 29.263 billion yuan, a year-on-year decrease of 13.01%, primarily due to a high base effect from the previous year [4][5] - The overseas sales revenue of self-developed games in August 2025 was 1.68 billion USD, a year-on-year decrease of 10.66% [5] Summary by Sections Industry Performance - The relative performance over the last 12 months shows a 30.22% increase, while absolute performance indicates a 48.4% increase [2] - The gaming market experienced a revenue decline in August 2025, attributed to the lack of new blockbuster products and the fading popularity of last year's hit [4][5] Regulatory Environment - The National Press and Publication Administration issued 156 game licenses in September 2025, including 145 domestic and 11 imported games [3] - The issuance of game licenses has been consistent, with 79 imported game licenses issued in 2025 compared to 75 in the same period of 2024 [3] Investment Recommendations - The gaming sector is viewed positively due to strong cash flow, ongoing policy support, and deepening AI game development [7] - Key companies to focus on include Kyeing Network, Giant Network, G-bits, Tencent Holdings, and Xindong Company [7]

Summary of the Gaming Industry Conference Call Industry Overview - The gaming industry in China has maintained high activity levels since the summer, with a market size of approximately 29 billion yuan in July, reflecting a year-on-year growth of nearly 5% [1][4] - Mobile game revenue showed a slight increase, with several new games performing well, such as "Douluo Dalu: Soul Master World," which generated over 100 million yuan in its first month [1][4] - The market size remained stable in August compared to July, but there was a year-on-year decline, with mobile game revenue decreasing by 4% [1][4] Key Insights - The overall performance of the gaming industry has been positive this year, supported by a relaxation of policies and an acceleration in supply growth [2] - The industry is in an upward trend, with new game launches significantly boosting company performance [2] - The release of 156 game licenses in September, including 145 domestic and 11 imported, indicates a healthy regulatory environment [6][7] Company-Specific Developments - Huatuo's core overseas products have shown strong performance, leading to an 11% month-on-month increase in revenue for Diandian Interactive [8] - Giant Network's game "Supernatural" has exceeded expectations in revenue stability, with plans to launch an overseas version next year [8] - Key products approved include new titles from Tencent, NetEase, and miHoYo, indicating strong competition among major players [6][7] International Market Performance - Chinese self-developed games generated nearly 1.7 billion USD in overseas revenue in July, with a year-on-year growth in single digits [5] - Despite a 10% year-on-year decline in August due to high base effects, some products like KingShow's "Frost Knight" maintained strong growth, with a 20% month-on-month increase [5] Future Trends - The legendary game market is substantial, with annual revenues of 30-40 billion yuan, and more legendary games are expected to enter the market [9] - Future growth will come from expanding partnerships with larger companies, the introduction of 25 key legendary games, and enhancements in PC, live streaming, and item trading functionalities [9] Product Development and AI Initiatives - Kaiying Network is entering a new product cycle, with "Blood of the River and Lake" launched in South Korea and plans for several new titles by 2025-2026 [10] - The AI product EVE is expected to launch by the end of the year, and the AI gaming platform Soon may begin commercialization [10] Performance of Key Companies - Gigabit has consistently outperformed expectations, with "Sword of the Hero" showing strong overseas revenue growth of 14% month-on-month in August [11] - Perfect World and Shenzhou Taiyue have new titles in development, with Perfect World's "Yihuan" showcased at the Tokyo Game Show [12] Overall Market Sentiment - The gaming industry remains strong, with companies performing well even in the traditionally slower month of September [13] - Continued investment opportunities are recommended in companies such as Giant Network, Kaiying Network, ST Huatuo, Perfect World, Gigabit, Shenzhou Taiyue, and Sanqi Interactive [13]

Group 1: Company Acquisition - Longfor Properties (600159) announced a preliminary intention to acquire 60% equity of Beijing Chengzhu Real Estate Development Co., Ltd. from Beijing Shunyi New Town Development Co., Ltd. to supplement its project reserves [1] - The target company was established in March 2025 with a registered capital of 600 million yuan, focusing on real estate development [1] - As of the announcement date, the target company has not generated any operating revenue [1] Group 2: Game Approval and Market Activity - On September 24, the National Press and Publication Administration approved 145 domestic online games, including 93 mobile games and 42 mobile-casual puzzle games [2] - By the end of September, a total of 1,275 game licenses have been issued in 2025, maintaining a high issuance frequency [2] - The regular issuance of game licenses reflects the regulatory support for the gaming industry [2] Group 3: Financing and Performance of Game Stocks - In September, three game stocks saw significant net purchases from financing clients, with Kunlun Wanwei, 37 Interactive Entertainment, and Giant Network receiving net purchases of 760 million yuan, 544 million yuan, and 153 million yuan respectively [3] - Kunlun Wanwei reported a revenue of 3.733 billion yuan in the first half of the year, a year-on-year increase of 49.23% [5] - 37 Interactive Entertainment achieved a revenue of 8.486 billion yuan in the first half, a year-on-year decrease of 8.08%, but its net profit increased by 10.72% to 1.4 billion yuan [5] Group 4: Profitability of Game Stocks - The top net profit earners in the gaming sector for the first half of the year include ST Huaman, 37 Interactive Entertainment, and Kaiying Network, with net profits of 2.656 billion yuan, 1.4 billion yuan, and 950 million yuan respectively [6] - Significant year-on-year profit growth was observed in companies like Sheng Tian Network and Youzu Network, with increases of 1186.02% and 989.31% respectively [6] - Several companies, including Perfect World and Glacier Network, reported a turnaround from losses to profits [6]

Core Viewpoint - AI 3D generation is a rapidly growing sector within generative AI, with significant market potential across various industries such as gaming, architecture, and design [3][4]. Market Potential - The future market for AI 3D generation is vast, as it lowers barriers in terms of toolchain, professional skills, and labor costs compared to traditional 3D generation methods [5]. - Major players like Tencent and startups such as VAST and Meshy are emerging, indicating a competitive landscape with a high ceiling for growth [5]. Current Challenges - Despite its potential, AI 3D generation faces uncertainties and anxieties due to its relatively late start and niche status [6]. - Key questions include the reliability of current AI 3D products, the efficiency improvements they offer, and how to balance product development with rapid technological advancements [7]. VAST's Tripo Platform - Tripo, an AI-driven 3D modeling platform, has over 30 million professional developers globally and offers a one-stop AI 3D workspace with features like intelligent segmentation and automatic rigging [10]. - The latest Tripo 3.0 model has increased parameters from billions to 20 billion, enhancing user capabilities in creation and design [10]. User Engagement and Community - VAST targets both UGC creators and professional users, facilitating community engagement through competitions and collaborative projects [25][29]. - The platform has successfully integrated user-generated content (UGC) into its ecosystem, allowing users to participate in real-world applications and competitions [25][29]. Industry Impact - AI 3D generation is expected to influence a wide range of industries, including gaming, animation, industrial design, and e-commerce, by enhancing efficiency and reducing costs [33]. - The technology is currently in a 3.0 phase, where diverse applications are emerging, and industries are increasingly adopting AI 3D solutions [35]. Product Development Strategy - VAST emphasizes the importance of both technical innovation and market research in product development, aiming to balance user needs with technological advancements [45][49]. - The company focuses on user-generated metrics such as model creation rates and engagement levels to guide product iterations and feature enhancements [50][52]. Future Directions - The integration of AI algorithms with engineering design is crucial for creating ideal products in the 3D generation space, as it allows for a comprehensive user experience [59][60]. - VAST aims to explore further applications of 3D technology in areas like video and embodied intelligence, although these directions remain uncertain [66][68].

Core Viewpoint - World Labs, founded by Stanford professor Fei-Fei Li, has launched a beta version of its platform Marble, which allows users to create and explore 3D worlds using advanced AI technology [5][7]. Group 1: Technology and Features - Marble utilizes a 3D world generation model that can create vast and detailed environments based on a single photo, estimating depth maps and geometric boundaries [11][12]. - The generated 3D worlds are permanent, consistent, and feature clearer geometric structures compared to previous technologies [14]. - Users can export their created worlds as Gaussian splats and integrate them into web-based 3D experiences using the open-source rendering library Spark [14][16]. Group 2: User Experience - Users can navigate the AI-generated 3D spaces using keyboard and mouse controls, similar to first-person gaming experiences [16]. - The platform currently offers various demo scenes that showcase different indoor and outdoor environments, with impressive detail and realism in lighting and textures [17]. Group 3: Market Position and Future Potential - While Marble has made significant advancements, it is still in the early stages of commercial application, focusing primarily on 3D environments without the capability to generate characters or animals [19]. - The emergence of Marble coincides with a growing interest in AI gaming, as other companies like xAI are also venturing into AI-driven game development [26]. - The overall trend indicates a shift towards enabling users to easily create complex virtual worlds and gaming experiences, positioning AI as a tool for personal creativity and exploration [28][29].

Core Insights - The article discusses the emergence of the AI game "Aivilization," which builds on the earlier Stanford University project "Smallville" by creating a more expansive and interactive virtual environment for AI agents [2][3][4]. Group 1: Game Overview - "Aivilization" is described as a sandbox multiplayer game, akin to an online version of "The Sims" or "Stardew Valley" with a focus on AI interactions [8]. - The game allows players to create and customize over 100,000 AI agents, leading to a growing trend on social media platforms [5][46]. - The primary goal of the game is to study how human-AI interactions shape virtual societies, enabling agents to develop their governance structures, economies, and cultures [9][10]. Group 2: Gameplay Mechanics - Players can customize the appearance and personality of AI agents but cannot directly control their movements, instead guiding them through a command window [9]. - The game simulates various real-world scenarios, such as schools and farms, where thousands of agents interact, affecting the economy and resource prices [10]. - Each agent operates under different player-defined goals, leading to diverse behaviors, from accumulating wealth to engaging in farming [13]. Group 3: AI Behavior and Decision-Making - The AI agents exhibit autonomous decision-making capabilities, reflecting their own "thoughts" and adapting to player instructions based on their circumstances [15][22]. - Agents can form social networks, develop friendships, and engage in conversations, mirroring real-life social dynamics [24]. - The game emphasizes the unpredictability of AI behavior, where small changes in player input can lead to significant variations in agent outcomes [40]. Group 4: Industry Context and Future Implications - The article contrasts "Aivilization" with other AI games that primarily focus on dialogue and linear storytelling, suggesting that "Aivilization" represents a new direction in AI gaming [26][36]. - The developers aim to create a sandbox environment that simulates a new civilization co-created by humans and AI, potentially expanding the boundaries of AI gaming [37]. - The success of "Aivilization" could signal a shift in the gaming industry towards more interactive and dynamic AI experiences, moving beyond traditional narrative-driven formats [47].

Core Viewpoint - The article highlights the significant gains that fund managers have achieved in the gaming sector, driven by the industry's recovery and the strategic focus on overseas markets and artificial intelligence to enhance profitability and efficiency [2][5]. Group 1: Fund Investment in Gaming Stocks - Public funds have increasingly concentrated their investments in gaming stocks, with notable companies like Giant Network, G-bits, ST Huatuo, and Xindong Company showing impressive performance, contributing to rapid increases in fund net values [3][4]. - As of September 11, 2023, stocks such as Giant Network and G-bits have seen price increases of approximately 2.5 times and 1.3 times, respectively, while ST Huatuo and Xindong Company have risen by about 2.6 times and 2.3 times [3][4]. - The total market value of public funds' holdings in media stocks reached 36.341 billion yuan, with gaming stocks accounting for 21.503 billion yuan, representing 59.17% of the total [4]. Group 2: Industry Recovery and Performance - The gaming industry's recovery is characterized by rapid earnings growth, with companies like ST Huatuo and Xindong Company reporting net profit increases of 129% and 268%, respectively, in the first half of 2023 [4]. - The Chinese gaming market's actual sales revenue reached 168 billion yuan in the first half of 2023, marking a year-on-year growth of 14.08%, while overseas sales of domestically developed games amounted to 9.501 billion USD, up 11.07% [5]. Group 3: Strategic Focus on Overseas Markets - The ability to expand into international markets is seen as a key driver for gaming companies' performance, with fund managers favoring those with established overseas experience [5]. - The rapid growth of overseas gaming revenue is highlighted, with ST Huatuo achieving 8.9 billion yuan in overseas game income in the first half of 2023, reflecting a gross margin of 70.99% [5]. Group 4: Policy Support and Technological Trends - The issuance of gaming licenses has accelerated, with 946 licenses granted from January to July 2023, a year-on-year increase of 19.29%, providing additional confidence for fund managers in the gaming sector [6]. - The rise of artificial intelligence is expected to lower R&D costs for gaming companies, with potential for new gaming devices and gameplay innovations, enhancing the sector's growth prospects [7][8].

Summary of Key Points from the Conference Call Company Overview - **Company**: Kaiying Network - **Industry**: Gaming Core Business and Strategic Direction - Kaiying Network focuses on the gaming industry, relying on four core businesses: R&D, publishing, investment, and IP management, aiming to create high-quality games [2][5] - The XY publishing platform has launched over 100 premium mobile games across various genres, including role-playing and simulation [2][6] Financial Performance - In the first half of 2025, Kaiying Network achieved a revenue of 2.578 billion yuan, a year-on-year increase of 0.89%, and a net profit attributable to shareholders of 950 million yuan, up 17.41% [3] - Total assets reached 10.036 billion yuan, growing by 25.04% compared to the end of the previous year [3] Global Expansion and Revenue Growth - The company actively pursued global publishing, with overseas revenue of 202 million yuan, a year-on-year increase of 59.57% [4][13] - Successful games in overseas markets include "Monster Alliance," "MU Immortal," and "Party Uncontrolled," achieving top rankings in various regions [4][13] IP Strategy - The company has accumulated numerous well-known IP licenses, including "Mobile Suit Gundam" and "Overlord," and is incubating original IPs rooted in traditional Chinese culture [2][7] - Plans to expand IP through short dramas, cultural tourism, and international strategies [2][7] AI and AR Developments - Launched an AR full-process development platform for the gaming industry, significantly shortening development cycles [2][8] - Introduced the "Warm Heart Valley Dream Journey" AR brand and the "Dapeng AR glasses," integrating AI for intelligent interaction [2][8] Future Product Development - The Eve product aims to build long-term emotional connections using a self-developed multi-modal interaction system, with a female version planned for Q4 2025 [10][12] - The company plans to continue launching new products and enhancing AI applications to drive growth [9] Shareholder Engagement and Financial Policies - Major shareholders and executives committed to not reducing their holdings for five years and used dividends for share buybacks, totaling 131 million yuan [4][14] - The company plans to distribute 214 million yuan in cash dividends as part of its profit distribution plan for 2024 [4][14] Market Trends and Competitive Landscape - The gaming industry is experiencing increased competition, with rising user acquisition costs due to a surge in game approvals and support from the government [27][28] - The company is diversifying its marketing strategies, including leveraging live streaming for promotion [27] Future Growth Areas - Future growth will focus on enhancing existing products, particularly nostalgic games, and expanding new product categories [27] - The company aims to strengthen its position in the "Legend Box" platform and enhance user engagement [30][31] Conclusion - Kaiying Network is strategically positioned in the gaming industry with a focus on high-quality game development, global expansion, and innovative use of technology, while maintaining strong financial health and shareholder engagement [2][3][4][5][6][7][8][9][10][12][14][27][28][30][31]

Investment Rating - The report maintains a "Strong Buy" investment rating for the company [3][7]. Core Views - The company achieved a revenue of 2.578 billion with a year-on-year growth of 0.89% and a net profit of 950 million, reflecting a year-on-year increase of 17.41% [1]. - The company is launching multiple new IP products and has initiated a share buyback program, indicating long-term confidence in its growth prospects [1][2]. - The company is focusing on consolidating its classic game categories while also expanding into new IPs, which is expected to drive overall growth [2]. Financial Performance - For the first half of 2025, the company reported a revenue of 2.578 billion, with a net profit of 950 million, and a net profit excluding non-recurring items of 939 million, showing growth rates of 0.89%, 17.41%, and 17.18% respectively [1]. - In the second quarter of 2025, the company recorded a revenue of 1.225 billion, a decline of 1.8% year-on-year, but a net profit of 432 million, which is a year-on-year increase of 12.8% [1]. - The company expects revenues of 6.167 billion, 7.000 billion, and 7.805 billion for the years 2025, 2026, and 2027 respectively, with corresponding net profits of 2.193 billion, 2.521 billion, and 2.855 billion [7][8]. Product Development and Market Strategy - The company has a rich pipeline of products, with several new games set to launch in the second half of the year and early next year, including titles based on popular IPs [2][6]. - The company is also expanding its overseas market presence, with significant revenue growth in international markets, particularly in RPG and SLG genres [2]. - Collaborations with other companies for game development and community building around its IPs are also in place, enhancing its market strategy [6][7].

Core Viewpoint - NetDragon is focusing on leveraging AI technology to enhance operational efficiency and drive growth in both gaming and education sectors, with a positive outlook for the second half of 2025 and beyond [1][4]. Financial Performance - In the first half of 2025, NetDragon reported revenues of 2.381 billion RMB, with gaming and application services generating 1.738 billion RMB and Mynd.ai contributing 641 million RMB [1]. - The company achieved a significant reduction in R&D expenses by 26.7% year-on-year, while overall sales and marketing expenses decreased by 4.6%, and administrative expenses fell by 14.0% [1][2]. Gaming Business - The gaming segment is expected to stabilize, with key IPs like "Magic Domain" showing an 11.3% year-on-year increase in monthly active users (MAU) [2]. - The company is actively pursuing cross-industry collaborations to enhance the cultural significance and social impact of its IPs [2]. - New product developments include "Code MY," which is undergoing user testing, and plans to launch multiple language versions of existing games in overseas markets [2][8]. Education Sector - Mynd.ai has faced revenue declines due to budget cuts in the European and American education markets, but is expected to recover as budgets stabilize [3][4]. - The company is implementing cost optimization strategies and has seen a recovery in gross margin to 31% in Q2 [3]. - NetDragon is expanding its AI capabilities in education, including the integration of AI voice assistant technology into its platforms [3][10]. Strategic Initiatives - The company is committed to global expansion, particularly in Southeast Asia, the Middle East, and Africa, while enhancing user experience through innovative products like AI production centers [4][12]. - Strategic partnerships, such as with Zhongke Wenge, aim to develop AI applications that can be marketed across various regions [11]. Future Outlook - Management expresses optimism for the gaming business to gradually recover, with expectations for Mynd.ai to reach EBITDA profitability by 2026 [4]. - The company plans to distribute at least 600 million HKD to shareholders through dividends and share buybacks within the next 12 months [4].