Industry Overview - The gaming industry is experiencing a recovery, with the domestic market's actual sales revenue reaching 168 billion yuan in the first half of the year, a year-on-year increase of 14.08% [1] - The number of domestic gaming users has approached 679 million, marking a historical high with a growth of 0.72% year-on-year [1] - Game stocks have performed well in the secondary market, with several companies, including ST Huatuo and Giant Network, seeing stock price increases of over 100% in the past year [1] Company Performance - Several gaming companies reported significant profit growth in the first half of the year, with Zhejiang Shuju, Youzu Network, and Shengtian Network achieving net profit increases of 156.26%, 989.31%, and 1186.02% respectively [1] - Century Huatong's revenue and profit saw substantial growth, with a projected revenue of approximately 17 billion yuan for the first half of 2025, representing an 83.27% year-on-year increase [7] Market Challenges - Despite the overall positive industry environment, many gaming companies are shifting focus towards AI, cloud computing, and other new business models due to increasing competition and market saturation [1][4] - The overseas market, once a significant growth area, is becoming more challenging, with companies like 37 Interactive Entertainment and Perfect World reporting declines in overseas revenue of 6.01% and 34.43% respectively [8] Technological Transformation - Companies are increasingly investing in AI and cloud computing technologies to enhance operational efficiency, although this requires significant capital and may not yield immediate financial returns [9][12] - Kunlun Wanwei is pivoting towards AI business development, while Zhongqingbao is focusing on cloud computing, with both companies seeing a shift in revenue sources away from gaming [12] New Revenue Streams - Kunlun Wanwei's short drama platform, DramaWave, has gained traction in overseas markets, contributing 583 million yuan in revenue in the first half of the year [16] - Perfect World is expanding its short drama offerings, generating 767 million yuan in revenue from its film and television business in the first half of the year [18] - Companies like 37 Interactive Entertainment and Youzu Network are exploring new IP development avenues, including adaptations of popular web novels into games and other media formats [18]

Core Insights - The company reported a strong mid-year performance for 2025, achieving a total revenue of 3.082 billion RMB, a year-on-year increase of 38.8%, and a significant profit surge of 223.5% to 811 million RMB [1][9] Financial Performance - The gross profit increased by 50.5% to 2.253 billion RMB, with the gross margin rising from 67.4% to 73.1% [1][2] - The sales and marketing expenses grew by only 7.0% to 744 million RMB, indicating improved marketing efficiency [3] - Research and development expenses rose by 30.8% to 549 million RMB, reflecting ongoing investment in product development [3] - General and administrative expenses decreased by 8.9% to 126 million RMB, primarily due to reduced share-based compensation [4] Gaming Business - The gaming segment generated 2.071 billion RMB in revenue, a 39.4% increase, driven by self-developed games such as "Ragnarok M: Beginners' Server" [5] - The paid game segment also saw a steady growth of 14.2%, supported by new titles [5] - The company has additional games in development and pre-development stages, indicating a robust pipeline for future releases [5] TapTap Platform Development - The TapTap platform achieved revenue of 1.011 billion RMB, a 37.6% increase, with stable monthly active users (MAU) at 43.63 million [7] - The company is transitioning TapTap from a discovery platform to a creation platform, with initiatives like the launch of TapTap PC version and mini-games [6][8] - AI applications are being integrated into the platform to enhance user experience and service personalization [8] Future Outlook - The financial health and cash flow position of the company provide a solid foundation for future growth, particularly through the TapTap platform [9] - The evolution from "discovery" to "creation" represents a strategic shift that could unlock new growth avenues for the company [9]

Core Viewpoint - CICC maintains IGG's earnings forecast and outperform industry rating, raising the target price by 26% to HKD 5.23, reflecting a valuation premium due to the strong initial performance of new products [1] Group 1: Financial Performance - For 1H25, IGG reported a revenue decline of 1% to HKD 2.721 billion, with a net profit of HKD 322 million and Non-IFRS net profit of HKD 332 million, aligning with CICC's expectations [2] - The company announced an interim dividend and special dividend totaling HKD 0.139 per share, representing approximately 50% of 1H25 net profit, with share buybacks accounting for about 11% of net profit [2][5] - The Non-IFRS net profit for 1H25 was HKD 323 million, with a gross margin increase of 4 percentage points and a sales expense ratio increase of 5 percentage points, while the adjusted net profit margin decreased by 0.5 percentage points [5] Group 2: New Product Launch - The new SLG game "Fate War" launched in early August generated HKD 20 million in revenue within the first three weeks, with a focus on user acquisition and revenue performance post-version updates [3] - The company plans to release a new version on September 30, which will include technical updates for low-performance devices and streamlined daily operations to enhance user engagement in core gameplay [3] Group 3: Existing Product Performance - The core existing products performed in line with expectations, with "Lords Mobile" experiencing a 14% revenue decline in 1H25, attributed to its maturity phase [4] - Revenue for "Doomsday" and "Viking Rise" grew by 6% and 18% year-on-year, respectively, with slight quarter-on-quarter declines, meeting expectations [4] - The company is planning gameplay adjustments for "Lords Mobile" by the end of the year and has initiated collaborations with films and other franchises to enhance user engagement and revenue [4]

Group 1 - The gaming sector is experiencing a slight decline, with the gaming ETF (159869) showing a minor drop, despite a net inflow of 321 million yuan over the past five trading days, indicating strong investor interest [1] - miHoYo has launched an official account for its new game "Honkai: Inheritance Spirits" across multiple social media platforms, showcasing its intent to expand its IP and diversify its offerings [1] - The new game allows players to explore various environments, collect unique spirits, and engage in automatic chess battles, enhancing the company's competitive edge in the two-dimensional and casual gaming markets [1] Group 2 - Zhonghang Securities reports that the gaming sector is driven by three factors: ongoing policy support, industry recovery, and accelerated AI implementation [1] - In the short term, the normalization of game approvals and the release of new titles during the summer will support performance [1] - In the medium to long term, AI technology is expected to reshape development and operations, leading to cost reduction and content upgrades, while global expansion will continue to open growth opportunities [1][2]

Group 1 - The core viewpoint is that multiple positive factors are driving the performance growth of A-share gaming companies, with most companies reporting increased earnings in their 2025 semi-annual reports [1] - The Chinese gaming industry showed steady growth in the first half of the year, with actual sales revenue reaching 168 billion yuan, a year-on-year increase of 14.08%, and the user base growing to nearly 679 million, up 0.72%, both hitting historical highs [1] - The continuous issuance of game licenses has added positive momentum to the industry, with 166 domestic games receiving licenses in August, marking the highest monthly issuance this year [1] Group 2 - Major domestic gaming companies are significantly increasing their investments in AI, which is enhancing operational efficiency [2] - Companies like Youzu Network have built integrated AI platforms to improve the quality and efficiency of various stages in game production, including art assets and game testing [2] - 37 Interactive Entertainment reported that over 80% of 2D art assets in the publishing process are generated with AI, producing over 500,000 images quarterly, while AI-generated game advertisement videos account for over 70% [2] - Perfect World has fully integrated AI tools into its development pipeline, significantly enhancing research and development efficiency through the large-scale application of AIGC (Artificial Intelligence Generated Content) production tools [2] - The gaming sector is experiencing multiple catalysts, including AI, content, and commercialization model transformations, with opportunities for investment in gaming ETFs tracking the performance of A-share listed companies in the animation and gaming industry [2]

Performance Highlights - Total revenue for the first half of 2025 reached 3.14 billion CNY, with overseas revenue growth of 92% [5][4] - Gross profit for the same period was 12.14 billion CNY, resulting in a comprehensive gross profit margin of 15% [6][7] - Pre-tax profit amounted to 20.05 billion CNY, indicating a significant increase [9] Business Strategy - The company focuses on "global IP product distribution and operation" in the gaming sector, leveraging AI technology to enhance game publishing through precise marketing and long-cycle operations [12][71] - The "Five Steps of Game Publishing" strategy is being steadily advanced, achieving breakthroughs in mini-program games and overseas market distribution [14] IP Development - Continuous innovation and iteration of classic IPs are being pursued, with notable examples including "Legend," "Hot Blood Jianghu," and "Miracle MU" [17][23] - The company collaborates with Century Huatong and Kaiying Network to create a comprehensive industrial chain for the "Legend" IP games, successfully transitioning from PC to mobile platforms [18][20] Global Market Expansion - The company has successfully launched and operated 11 different language versions of games in international markets, with over 30 multilingual games achieving top rankings on platforms like iOS and Google Play [34][32] - The brand "Game Lovin" was established in 2025 to signify the company's global expansion and commitment to gaming [37] AI Integration - The company emphasizes the application and innovation of AI technology in gaming, viewing it as a core driver for enhancing user experience and operational efficiency [38][71] - A proprietary AI analysis system, "He Tu," and a media management system, "Luo Shu," have been developed to optimize business processes [39][40] New Consumer Segment - The company is expanding into new consumer segments, including fast food and trendy toys, leveraging insights from terminal users [42] - The brand "Zhazhahui" was launched in 2020, achieving leading sales in its category [44] Social Responsibility - The company has engaged in various social responsibility initiatives, including donations and educational support, reflecting its commitment to community welfare [49][56] Future Outlook - The company aims to maintain high-quality development by deepening its gaming ecosystem and diversifying its IP matrix [64] - Continued integration of AI technology is expected to enhance operational efficiency and user retention [65]

Core Insights - The A-share gaming companies have shown significant performance growth in the first half of 2025, driven by multiple positive factors [1][2][3] - The domestic gaming market in China reached a sales revenue of 168 billion yuan, marking a year-on-year growth of 14.08% [1] - The continuous issuance of game licenses has positively impacted the industry, with 166 domestic games receiving licenses in August, the highest monthly number this year [1] Financial Performance - Jiubang Network reported a revenue of 1.662 billion yuan, a year-on-year increase of 16.47%, and a net profit of 777 million yuan, up 8.27% [2] - Perfect World achieved a revenue of 3.69 billion yuan, with a year-on-year growth of 33.74%, and a net profit of 503 million yuan, soaring by 384.52% [1] - Jibite's revenue reached 2.518 billion yuan, reflecting a growth of 28.49%, and a net profit of 645 million yuan, up 24.50% [1] Market Trends - ST Huatuo is expected to report a revenue of approximately 17 billion yuan, a year-on-year increase of about 83.27%, with net profit projections between 2.4 billion to 3 billion yuan, reflecting a growth of 107% to 159% [3] - Major gaming companies are significantly increasing their investments in AI, which is enhancing operational efficiency [3][4] AI Integration - Youzu Network has developed an integrated AI platform that improves the quality and efficiency of various game development processes, including art assets and localization [3] - 37 Interactive Entertainment reported that over 80% of its 2D art assets are generated with AI assistance, producing over 500,000 images quarterly [4] - Perfect World has fully integrated AI tools into its development pipeline, significantly enhancing research and development efficiency through the use of AIGC [4]

Industry Overview - The gaming industry in China showed an overall growth trend in the first half of 2025, with actual sales revenue reaching 168 billion yuan, a year-on-year increase of 14.08% [1] - The number of gaming users in China approached 679 million, reflecting a slight growth of 0.72% year-on-year [1] - The mobile gaming market generated 125.31 billion yuan in revenue, up 16.55% year-on-year, while the client game market saw revenue of 35.40 billion yuan, increasing by 4.86% [1] Company Performance - Among the 17 listed gaming companies that disclosed their semi-annual reports, 7 reported profit growth, 1 turned a profit, and 2 reduced losses [1] - Hubei Sheng Tian Network Technology Co., Ltd. reported a net profit of 52.30 million yuan, a staggering increase of 1186.02% year-on-year [2] - Youzu Interactive Co., Ltd. achieved a net profit of 50.16 million yuan, up 989.31% year-on-year, while Zhejiang Publishing Culture Group Co., Ltd. reported a net profit of 377 million yuan, a growth of 156.26% [2] Regulatory Environment - The National Press and Publication Administration issued 757 domestic game licenses in the first half of 2025, marking an increase compared to the same period in 2024 [2] - June 2025 saw a record issuance of 147 game licenses, the highest monthly figure since 2022 [2] Technological Advancements - Companies are increasingly leveraging AI technology in their operations, with significant developments reported in AI applications for game development and marketing [3][4] - Sheng Tian Network is expanding its overseas market presence, with notable revenue growth from its game "Star Wings," launched in South Korea and Southeast Asia [3] - Youzu Interactive has established an AI empowerment system that covers the entire game development and distribution process, enhancing player engagement [4] - Perfect World is collaborating with NVIDIA to integrate advanced AI technologies into game development, enhancing content creation and gameplay optimization [5] Future Outlook - The gaming industry is expected to continue evolving with the integration of AI and cloud computing technologies, potentially leading to new game types and business models [5] - The ongoing advancements in AI are anticipated to reshape the gaming landscape, creating opportunities for companies to achieve both cultural and commercial value in domestic and international markets [5]

Core Viewpoint - The company is launching a new mobile game titled "New Moon Continent" based on the classic game IP "Miracle MU," aiming to leverage the significant commercial potential of the IP while providing a unique gaming experience [1][2]. Group 1: Game Development and Strategy - "New Moon Continent" is designed to retain classic elements of the "Miracle MU" IP while introducing a distinctive "box-like" gameplay mechanic, aiming to create an unprecedented gaming experience for players [1]. - The company has successfully expanded the "Miracle MU" IP from PC games to various formats, including web and mobile games, achieving impressive revenue results with multiple derivative products [1][2]. Group 2: Global Expansion and Market Performance - The company has established a collaborative development and publishing model through its subsidiary, Jiangxi Tanwan Information Technology Co., Ltd., achieving significant results in classic IP value extraction and global layout [2]. - The "Miracle MU" IP is a crucial part of the company's classic IP product strategy, with the launch of "New Moon Continent" reinforcing its commitment to high-quality game publishing and global distribution [2]. - The overseas release of "Miracle MU: Infinite Golden Egg" in Vietnam achieved remarkable success, topping both the iOS and Google Play free and revenue charts on its launch day, with 800,000 new registered users in the first month [2]. Group 3: AI Integration in Gaming - The company is focusing on the application of AI in the gaming industry to enhance precision marketing, optimize new game development and testing efficiency, accelerate game launch speed, and achieve intelligent game operations [3].

Group 1 - The emergence of AI in the gaming industry is marked by the release of DeepSeek's R1 model, which has significantly impacted both major companies and ordinary users [3][5] - The gaming industry is increasingly integrating AI to enhance player interactions with non-player characters (NPCs), aiming for a more immersive and nonlinear gaming experience [8][9] - The game "Whispers from the Star," developed by miHoYo, exemplifies the shift towards AI-driven gameplay, allowing players to interact with AI characters to influence story outcomes [16][20] Group 2 - The AI technology is transforming game development, leading to a divide where only a small percentage of top teams may create groundbreaking content, while others may need to reconsider their roles in the industry [18][20] - AI-generated content (AIGC) is becoming prevalent in various aspects of game production, from art design to voice acting, showcasing the versatility and potential of AI in enhancing gaming experiences [24][30] - The gaming industry serves as a testing ground for AI technologies, as it encompasses multiple forms of media and entertainment, making it a prime candidate for AI integration [29][30]