Core Insights - The Chinese playing card industry has a rich history and a broad consumer base, with a market size of 5.271 billion yuan in 2022, reflecting a year-on-year growth of 12.8%. However, the market is projected to decline to 5.009 billion yuan in 2024, a decrease of 2.1% due to various factors such as evolving entertainment preferences and insufficient industry innovation [1][7]. Overview - Playing cards are a traditional entertainment tool made of paper, used in various games and activities. They are recognized for their simplicity and broad appeal, serving not only as a game but also in magic performances, cultural dissemination, and advertising [2]. Business Model - The majority of Chinese playing card companies adopt a combination of in-house and outsourced R&D. Mainstream brands are categorized into manufacturing brands with independent production systems and retail brands that rely on outsourcing for supply [4]. Development History - The modern form of playing cards in China originated from ancient games, with the first batch of playing cards produced in 1931. The industry saw significant growth in the 1980s, with key players like Yaoji Technology entering the market [5]. Industry Chain - The upstream of the playing card industry includes suppliers of specialized paper, inks, and production equipment. The midstream involves design and production, while the downstream consists of various sales channels including supermarkets and e-commerce [6]. Current Development - The playing card industry in China is becoming increasingly important as a social sports project, with a significant market presence. However, recent trends indicate a decline in consumer demand due to changing entertainment forms and reduced consumption scenarios [1][7]. Competitive Landscape - The market concentration has increased, with leading companies like Yaoji Technology and Ningbo San A Group dominating the mainstream market. Yaoji Technology is noted for its fully automated production capabilities and high-quality standards [8][10]. Future Trends - The future of the playing card industry is expected to focus on sustainability, with a shift towards eco-friendly materials. Innovations such as digital printing and integration with technologies like RFID and AR are anticipated to enhance product offerings and consumer engagement [11].

Investment Rating - The report maintains a "Strong Buy" investment rating for the company [3][7]. Core Views - The company's revenue has been under pressure due to adjustments in the digital marketing segment, with a significant year-on-year decline of 24.64% in the first half of 2025 [7]. - The gaming business remains resilient, with a slight revenue decline of 6% year-on-year, indicating strong player engagement [7]. - The company is strategically investing in the collectible card market, particularly focusing on sports cards, to diversify its entertainment offerings [7]. - Future revenue projections for 2025-2027 are estimated at 33.86 billion, 36.40 billion, and 38.47 billion respectively, with corresponding net profits of 5.54 billion, 6.35 billion, and 6.97 billion [7]. Financial Data Summary - The company reported total revenue of 14.38 billion in the first half of 2025, with a net profit of 2.56 billion [1][7]. - The digital marketing segment's revenue fell to 5.2 billion, accounting for 36% of total revenue, down from 46% in the previous year [7]. - The gaming segment's revenue increased its share to 33% of total revenue, while the card business accounted for 30% [7]. - The projected earnings per share (EPS) for 2025 is 1.33, with a price-to-earnings (PE) ratio of 21.4 [2][10]. Valuation Metrics - The current stock price is 28.41 yuan, with a market capitalization of 11.9 billion [3]. - The company has a return on equity (ROE) of 14.2% and a debt-to-asset ratio of 28.2% [3][10]. - The estimated price-to-book (PB) ratio for 2025 is 2.9, indicating a favorable valuation compared to historical levels [2][10].

Investment Rating - The report maintains a "Buy" rating for the company, indicating an expected performance that will exceed the Shanghai and Shenzhen 300 Index by more than 15% [12][20]. Core Insights - The company's revenue has declined, primarily due to a reduction in digital marketing business, while profit remains relatively resilient. Future focus will be on the recovery of business operations and the implementation of poker production capacity and AI enhancements across various business lines [4][12]. - The projected earnings per share (EPS) for 2025-2027 are 1.46, 1.55, and 1.63 yuan, respectively, which have been adjusted downwards from previous estimates due to declines in marketing and gaming businesses. The target price has been revised to 35.04 yuan, down from 38.96 yuan [12][14]. Financial Summary - **Revenue**: The company reported a revenue of 3.271 billion yuan in 2024, a decrease of 24.04% year-on-year. The digital marketing segment saw a significant decline of 40.25%, contributing to the overall revenue drop [6][12]. - **Net Profit**: The net profit attributable to the parent company was 539 million yuan, down 4.17% year-on-year. Despite the revenue decline, the overall profit margin improved across various business segments [6][12]. - **Gross Margins**: The gross margins for digital marketing, gaming, and poker businesses were reported at 7.76%, 96.15%, and 30.40%, respectively, showing improvements compared to the previous year [12][13]. - **Cost Management**: Marketing, management, and R&D expenses have decreased, maintaining stable expense ratios of 8.04%, 8.36%, and 5.72% [12][13]. Business Development - The company is focusing on enhancing its leading position in the poker industry by advancing the construction of a production base with an annual capacity of 600 million decks of cards, expected to be operational by early 2027 [12][13]. - The company is also exploring business and technological innovations, including the development of a short video center and AI-driven enhancements in gaming and marketing sectors [12][13].