Core Insights - iQIYI's "Peach Bean World" represents a significant innovation that combines generative artificial intelligence with film IP and interactive entertainment, addressing the core needs for immersive user interaction and the relatively short lifecycle of IPs [1][12] - The platform aims to enhance user engagement with content and extend the lifecycle of IPs, thereby creating more development opportunities [2] Technological Advancements - "Peach Bean World" employs comprehensive model training to enable AI to deeply learn scripts, dialogues, and character settings, ensuring consistency in character traits and worldviews [3] - The integration of self-developed "Qisheng" AI voice technology allows for real-time emotional voice interaction, significantly enhancing user immersion [3] - The establishment of an intelligent agent framework with continuous learning capabilities enables characters to evolve through ongoing user interactions [3] Product Innovation - The platform features a diverse interactive product matrix, allowing users to engage in deep conversations with over 1,200 AI characters from more than 100 film IPs [3] - Innovative features include "Character Dynamics," which simulates social network interactions, and tools for users to create their own storylines [3] - The project also supports multi-character group chats and themed reasoning games, surpassing traditional chatbot interactions [3] Market Impact - "Peach Bean World" has achieved over 100 million chat rounds since its launch, indicating strong user engagement and continuous innovation in gameplay [8] - The emotional companionship provided by AI characters positively impacts users' mental health while fulfilling entertainment needs [8] - The platform's ability to maintain long-term emotional connections with users extends the commercial value and lifecycle of film IPs [6] Future Prospects - iQIYI plans to launch "Peach Bean" in 2025, which will serve as a personal intelligent assistant for users, further enhancing emotional interaction and practical functionalities [6] - The ongoing exploration of AI applications and rapid advancements in multimodal generation capabilities suggest a promising future for richer interactive forms [11] - The shift from a one-way content dissemination model to a two-way, multi-faceted value co-creation ecosystem is redefining the boundaries and possibilities of the entertainment industry [8]

Summary of Conference Call Notes Industry Overview - The report focuses on the **SMID (small-mid cap) Internet/Media sector in China** and reflects recent secular changes in the industry [2][4]. Key Companies and Ratings - **Damai**: Maintained an Overweight (OW) rating; price target raised from HK$0.58 to HK$1.20, reflecting a 107% increase [3][15]. - **37 Interactive Entertainment (37IE)**: Maintained OW rating; price target increased from RMB 23.00 to RMB 25.90, a 13% rise [4][15]. - **Maoyan**: Downgraded from OW to Equal-weight (EW); price target adjusted from HK$7.50 to HK$8.00, a 7% increase [6][15]. - **JOYY**: Maintained EW rating; price target raised from US$40.00 to US$62.00, a 55% increase [4][15]. - **IQIYI**: Maintained EW rating; price target increased from US$2.10 to US$2.30, a 10% rise [4][15]. - **Focus Media**: Preferred over Weibo due to expected growth from self-help initiatives [6]. Core Insights - **IP Derivatives Demand**: There is a growing demand for IP derivatives in China, with Damai positioned to benefit from its domestic sub-licensing business [3]. - **Long Video and Live-Streaming**: These sectors are entering a more favorable policy environment, with valuations currently below historical levels. Price targets for JOYY and HUYA have been lifted due to improving trends [4]. - **Gaming Sector**: Smaller game companies are experiencing a re-rating due to successful new titles, leading to raised earnings forecasts for 2025/26 [5]. - **Film Industry Challenges**: Film companies may face difficulties in re-rating due to muted industry growth and weaker visibility for fundamentals, leading to downgrades for Maoyan and others [6]. Additional Insights - **Branding Advertising**: The branding advertising industry is not expected to recover immediately, but Focus Media is seen as a better investment compared to Weibo due to its strategic initiatives [6]. - **Valuation Adjustments**: The report includes various valuation adjustments for companies based on earnings revisions and shifts to sum-of-the-parts (SOTP) valuation methods [15]. Market Performance - The report provides a detailed analysis of stock price performance over different time frames, indicating significant variances in performance among the companies covered [12]. Conclusion - The SMID Internet/Media sector in China is undergoing significant changes, with varying growth prospects across different segments. Companies like Damai and 37IE are favored for their growth potential, while challenges remain for the film industry and certain live-streaming platforms.