Investment Rating - The industry investment rating is "Outperform the Market," indicating a projected increase of over 10% in the industry index relative to the broader market within the next six months [9]. Core Insights - The report highlights that the issuance of game licenses remains high, with 127 domestic games and 7 imported games approved in July 2025. This reflects a robust supply side and a stable trend towards normalization in license issuance [2][7]. - Key titles that received approval include "Kingshot" by Diandian Interactive, which is expected to leverage its success in overseas markets to become a significant product in the domestic SLG (Simulation and Strategy Game) sector [2][3]. - Tencent's "The Finals," a PC-based FPS game, is also noted for its potential to become a dark horse in the FPS market, given its unique gameplay and adaptation for domestic players [3]. - The report emphasizes the strong performance of established IPs like "Diablo IV" and "Marvel's Secret Wars," which are anticipated to perform well in the domestic market due to their established fan bases and innovative gameplay mechanics [4][7]. Summary by Sections Industry Events - In July 2025, the National Press and Publication Administration announced the approval of 127 domestic games and 7 imported games, maintaining a high issuance rate [1][2]. Investment Highlights - The report indicates that 884 domestic games have been approved year-to-date, with July's approvals slightly down from June but still at a high level. Notable titles include "Kingshot," "The Finals," and "Diablo IV" [2][4]. - The report suggests that the gaming industry is on a recovery path, with a consistent release of licenses and a focus on diverse product offerings from leading companies [7]. Company-Specific Insights - Diandian Interactive's "Kingshot" is highlighted for its innovative gameplay that combines tower defense and simulation elements, aiming to cater to domestic players' preferences [2]. - Tencent's adaptation of "The Finals" is expected to enhance player experience through new modes and anti-cheat systems, positioning it well in the competitive FPS market [3]. - "Marvel's Secret Wars" is noted for its unique blend of strategy card and chess elements, leveraging its strong IP to attract players [4][7].

Market Overview - On July 23, both the Hong Kong Hang Seng Index and the A-share Shanghai Composite Index rose, with the former stabilizing above 25,500 points, reaching a new high since November 2021, while the latter touched the critical 3,600 points [2] - The gaming sector in Hong Kong saw significant capital inflow, rising by 4%, with Tencent (00700.HK) being the largest contributor, increasing by 4.94% to HKD 552.0 per share, marking a new high since June 2021 [2][3] Company Performance - Tencent's stock performance was notable, with a significant increase in market capitalization, while other gaming stocks like Kingsoft (03888.HK), NetEase (09999.HK), Bilibili (09626.HK), and Xindong Company (02400.HK) also saw gains of 3.89%, 2.59%, 2.33%, and 1.56% respectively [2][3] - Flying Fish Technology (01022.HK) experienced the highest single-day increase of 49.15% following a profit announcement, projecting a net profit of approximately RMB 55 million to 70 million for the first half of 2025, compared to a loss of RMB 2 million in the same period last year [3][7] A-share Market - In the A-share market, the gaming sector also performed well, with ST Huatuo (002602.SZ) rising by 4.22%, and other companies like Gigabit (603444.SH) and 37 Interactive Entertainment (002555.SZ) also recording gains [4] Regulatory Environment - The National Press and Publication Administration approved 127 domestic games and 7 imported games in July, contributing to the positive sentiment in the gaming sector [5] - Notable approvals included Tencent's "Summon Adventure" and NetEase's "Diablo IV," indicating a steady release of new content in the market [5] Industry Trends - Analysts noted a solidifying trend of regular game approvals, coupled with domestic gaming innovations, suggesting a recovery in the industry's growth pace [6] - The summer season is a critical period for game developers, with many launching new titles aimed at enhancing player engagement through strong narratives and social elements [6] Financial Outlook - Market expectations for Tencent's Q2 2025 revenue and gross profit are optimistic, with projected year-on-year growth of 12% and 17% respectively, driven by an 18% increase in online gaming revenue [7] - HSBC forecasts NetEase's Q2 performance to be stable, with an expected revenue growth of 11%, supported by a significant increase in PC game revenue [8] - Analysts express a positive outlook for the gaming sector, citing improvements in supply and the emergence of quality content, alongside the impact of AI technology on cost reduction and efficiency [8]

Core Viewpoint - The summer gaming season of 2025 is expected to be highly competitive, with a record number of new game releases and significant industry changes driving this intense environment [2][4]. Group 1: Game Releases and Competition - A total of 26 new games are scheduled for release in July, along with 15 limited tests, marking one of the most competitive summer seasons in history [2]. - Tencent plans to launch two new games: the eco-friendly casual game "Carbon Island" on July 2 and the multiplayer RPG "Star Resonance" on July 17 [2]. - NetEase is set to release the highly anticipated PC game "No Master Star Abyss" on July 17, which has already gained significant attention by topping the global trial rankings during a recent Steam event [2]. Group 2: Regulatory Environment and Market Growth - The issuance of game licenses has significantly increased, with 158 games approved in June alone, marking a peak for the year and the highest monthly total since 2003 [5]. - From the beginning of the year to June, 757 domestic games and 55 imported games have received approval, indicating a trend towards regular issuance of licenses that supports industry growth [6]. - The Chinese gaming market showed a positive growth trend, with a market size of 28.051 billion yuan in May 2025, reflecting a year-on-year increase of 9.86% [6]. Group 3: International Expansion and Challenges - The global mobile gaming market is projected to reach 635.57 billion yuan in 2024, with Chinese mobile games accounting for 37.5% of the market, up from 32% in previous years [8]. - However, competition in overseas markets is intensifying, with companies like NetEase making significant cuts to their international operations, including layoffs in Japan and North America [8][9]. - Regulatory changes, such as the FTC's fine against miHoYo for its game "Genshin Impact," have added uncertainty to the industry, impacting revenue and market positioning [9][11]. Group 4: Domestic Market Dynamics - Despite the challenges in international markets, the domestic gaming market continues to show potential, with a focus on high-quality content leading to successful titles like "Honor of Kings" maintaining top revenue positions globally [15]. - The competitive landscape remains fierce, with companies needing to adapt their strategies to thrive in both domestic and international arenas, emphasizing the importance of quality and innovation [14][15].

Group 1 - The issuance of domestic game licenses has shown a continuous upward trend, with a total of 757 domestic and 55 imported licenses granted in the first half of the year, exceeding 800 in total [1] - The stable supply of licenses is expected to help the industry transition from scale expansion to quality upgrading, encouraging companies to focus on high-quality game development through innovation and technology [1] - The recent policies from various provinces, such as Zhejiang and Beijing, aim to support the gaming industry’s high-quality development and international expansion, indicating a favorable regulatory environment [2] Group 2 - The overseas market is becoming a new growth engine for companies, with several firms reporting significant success in international markets, such as the launch of games that topped charts in Japan and other countries [3][4] - Companies are increasingly leveraging mature IPs and localized operations to enhance user engagement and overcome cultural barriers in international markets [4] - The normalization of license issuance is releasing supply vitality in the gaming industry, allowing numerous new games to enter the market and reshaping the competitive landscape [5] Group 3 - Companies are actively participating in major gaming events to promote their new titles, with several games set to launch in the upcoming months, indicating a robust pipeline of new products [5][6] - The integration of AI and other advanced technologies is transforming game development and gameplay, with significant improvements in efficiency and user experience [6] - The gaming market in China is projected to grow significantly, with estimates suggesting it could exceed 500 billion yuan by 2025 and reach 670 billion yuan by 2030, reflecting a compound annual growth rate of over 8% [6] Group 4 - Despite the growth in the gaming industry, challenges such as homogenized competition and high marketing costs persist, necessitating innovation and improved global strategies among companies [7] - The domestic gaming market is expected to grow steadily, with mobile games remaining dominant, while PC and console games may gain market share through high-quality offerings [7] - Companies with strong capabilities in quality development, global operations, and technological innovation are likely to gain a competitive advantage in the evolving industry landscape [7]

Core Insights - The first batch of domestic game licenses for 2024 has been issued, with a total of 115 games approved, surpassing the previous month's 105 licenses, indicating a significant increase in the approval rate [1][8] - The stock market reacted positively to the news, with notable gains in several gaming companies, including Zhongqingbao, which rose over 12% [1][2] Group 1: License Issuance - The issuance of 115 game licenses marks a continuous increase, with the previous high being 105 licenses in December 2023 [1][8] - The 2023 total for game licenses reached 1,075, with 977 being domestic and 98 imported, compared to 512 licenses in 2022 [8][9] Group 2: Market Reaction - Following the announcement, A-share gaming stocks experienced a rebound, with Zhongqingbao increasing by 12.44% to 16.72, and other companies like Bingchuan Network and Shengtian Network also seeing gains [2][3] - In the Hong Kong market, companies such as Xindong Company and Zhongyou Game also reported increases, reflecting a broader positive sentiment in the gaming sector [2][3] Group 3: Industry Trends - The stability of the license policy is seen as a positive signal for gaming companies, fostering a trend towards the premiumization of games in the domestic market [9][10] - The gaming industry is moving towards self-regulation, with companies actively participating in setting industry standards, indicating a shift towards sustainable development [9][10]

Core Viewpoint - The article discusses the current state of the Chinese gaming market, highlighting the challenges and opportunities for companies amidst a stagnant market environment, with a focus on the recent approval of new games and the implications for industry players [2][4]. Game Approval Insights - On April 21, the National Press and Publication Administration approved a total of 127 games, with 46 being "casual puzzle" games, accounting for 39% of the approved titles [2]. - Mobile games dominate the approvals, with over 110 titles, while only two pure PC games were approved [2]. - Tencent's game "Path of Exile: Ascendancy" has over 2 million pre-registrations, indicating strong market interest [2]. Market Trends - The overall Chinese gaming market has stagnated around 300 billion RMB for several years, with growth momentum diminishing [4]. - Companies are increasingly conservative in their game offerings, preferring to release genres and models that have been previously validated by the market [4]. - The article notes that the approval of games like "Legend of Maifa" and "Monopoly: Top Winner" reflects a trend towards established game types that have been successful in the past [4]. Industry Challenges - An industry analyst suggests that the market is not yet facing a demand bottleneck, but rather a lack of decision-makers and talent on the supply side [4]. - The current game offerings are characterized by significant homogeneity, limiting player choices and leading to a reliance on social gameplay mechanics, which may not be essential for engaging game experiences [4]. - The normalization of game approvals raises questions about how companies can succeed in a zero-sum market environment [4].