Group 1: Game Launch and Features - Bilibili's new strategy card game "Three Kingdoms: Hundred Generals Card" is set to enter the competitive market of strategy and casual card games, with a public test scheduled for October [2] - The game features asymmetric casual competitive gameplay, with each match lasting under three minutes, allowing players to collect famous generals from the Three Kingdoms era and experience iconic battles [2] - Unique gameplay mechanics include "hero skills" and a 2v3 mode with hidden roles, aiming to provide diverse strategies and enhance player engagement [2] Group 2: Financial Performance - Bilibili reported a total revenue of 7.34 billion yuan for Q2, marking a 20% year-on-year increase, with net profit reaching 218 million yuan [3] - The mobile gaming segment significantly contributed to this growth, with revenue from mobile games soaring by 60% to 1.61 billion yuan [3][4] - The success of the game "Three Kingdoms: Strategize the World" has been pivotal, achieving rapid user acquisition and high revenue, solidifying its long-term operational potential [4] Group 3: Market Competition and Challenges - The gaming market, particularly in the Three Kingdoms genre, is highly competitive, with numerous established titles and new entrants vying for market share [5] - Bilibili's new game faces challenges in differentiating itself from popular titles like "Three Kingdoms Kill" and "Hearthstone," which dominate the card game segment [5][6] - The company aims to adapt its offerings to meet the preferences of younger users, focusing on innovative gameplay experiences to stand out in a saturated market [4][5]

Investment Rating - The report maintains a "Buy" rating for the company with a target price of 27.50 CNY [5][3]. Core Views - The company is expected to optimize its self-developed project diversification in 2026, leading to an increase in the proportion of self-developed games and an improvement in gross margin. The forecasted net profit for the company from 2025 to 2027 is 2.763 billion, 3.226 billion, and 3.656 billion CNY respectively, with adjustments made based on game launch progress and marketing data [3][9]. Financial Performance Summary - The company's revenue for H1 2025 was 8.49 billion CNY, a year-on-year decrease of 8%, primarily due to the decline of older games like "Seeking the Great Thousand." The gross margin for H1 2025 was 76.7%, down 2.9 percentage points, mainly due to an increase in the proportion of agency games. The net profit attributable to the parent company was 1.4 billion CNY, an increase of 11% year-on-year, mainly due to reduced sales expenses [9]. - Domestic revenue for H1 2025 was 5.76 billion CNY, a year-on-year decrease of 9%, while overseas revenue was 2.72 billion CNY, a year-on-year decrease of 6%. The company has several global products awaiting launch, with a diverse portfolio across various genres [9]. - The company has significantly integrated AI technology into its operations, with over 80% of 2D art assets and over 30% of 3D assets generated using AI. AI has also been involved in generating over 70% of game advertising materials and has achieved a 95% accuracy rate in localizing translations for 85% of its overseas games [9]. Financial Forecasts - The projected revenue for the company from 2023 to 2027 is as follows: 16.547 billion, 17.441 billion, 17.087 billion, 18.097 billion, and 18.646 billion CNY, with corresponding growth rates of 0.9%, 5.4%, -2.0%, 5.9%, and 3.0% [4][11]. - The forecasted net profit for the same period is expected to grow from 2.659 billion CNY in 2023 to 3.656 billion CNY in 2027, with growth rates of -10.0%, 0.5%, 3.4%, 16.8%, and 13.3% respectively [4][11].

Core Viewpoint - Company reported a decline in revenue for the first half of 2025, but a significant increase in net profit, indicating improved profitability despite revenue challenges [1][2] Financial Performance - For the first half of 2025, the company achieved revenue of 8.486 billion yuan, a year-on-year decrease of 8.08%, while net profit attributable to shareholders was 1.4 billion yuan, an increase of 10.72% [1] - In Q2 2025, the company reported revenue of 4.243 billion yuan, down 5.33% year-on-year, but net profit increased by 31.24% to 851 million yuan [1][2] - The company announced a cash dividend of 2.10 yuan per share, totaling 926 million yuan for the first half of 2025, representing 66% of net profit [1] Cost Management and Profitability - The significant improvement in Q2 2025 net profit was attributed to a reduction in sales expenses, which decreased by 19.3% to 1.99 billion yuan [1] - The sales expense ratio fell by 8.1 percentage points to 46.9%, primarily due to the transition of key games into maturity, leading to reduced marketing spend [1] - AI-driven advertising has enhanced the efficiency of user acquisition, with AI advertising accounting for 50% of total ad spend, improving efficiency by 70% [1] Product Performance and Future Outlook - The decline in Q2 revenue was influenced by the introduction of new games, which are still in the launch phase, compared to stable revenue from mature games in the previous year [2] - The company is set to launch its self-developed game "Douluo Dalu: Hunting World," which has already topped the iOS free chart, expected to contribute to revenue in Q3 [2] - The company has a rich product pipeline, with a focus on the release schedule of new games, including various genres such as SLG and MMORPG [2] Investment Outlook - Projections for 2025-2027 indicate revenues of 18.838 billion, 20.322 billion, and 21.546 billion yuan, with net profits of 2.931 billion, 3.334 billion, and 3.819 billion yuan respectively [2] - The company is expected to maintain a "buy" rating due to its recovering user acquisition costs and promising new game performance [2]

Core Viewpoint - The company, Sanqi Interactive Entertainment, reported a solid performance in the first half of 2025, with a revenue of 8.486 billion yuan and a net profit of 1.4 billion yuan, reflecting a year-on-year growth of 10.72% [1] Financial Performance - In the first half of 2025, the company achieved an operating income of 8.486 billion yuan and a net profit attributable to shareholders of 1.4 billion yuan, marking a 10.72% increase year-on-year [1] - The company plans to distribute a cash dividend of 2.10 yuan per 10 shares, amounting to approximately 462 million yuan, with total dividends for the half-year expected to reach 924 million yuan [1][3] - Cumulatively, the company has distributed a total of 5.778 billion yuan in cash dividends over the past three fiscal years, with total repurchase amounts exceeding 700 million yuan [3] Product Development and Market Performance - The company launched several successful new products in 2025, with the highest monthly revenue from mobile games reaching approximately 2.2 billion yuan [1] - Notable game releases include "Time Explosion," which topped the iOS free chart, and "Douluo Continent: Soul Hunting World," which quickly ascended to the iOS free chart and ranked 13th on the iOS revenue chart [1] - The company continues to develop a diverse range of products, with over 20 key titles in the pipeline, covering various themes such as Eastern fantasy and Western magic [2] Investor Returns - The company has established a robust return system for investors through consistent cash dividends, share buybacks, and executive stock purchases, enhancing investor confidence [3] - Starting in 2024, the company will increase its dividend frequency from semi-annual to quarterly, demonstrating a commitment to stable and continuous dividend policies [3]

Group 1 - The game ETF (159869) has experienced a narrow fluctuation, currently up by approximately 0.5%, with notable stocks such as Youzu Interactive hitting the daily limit, and others like Iceberg Network and Light Media rising over 1% [1] - The game ETF has seen continuous net inflows for 11 consecutive trading days, accumulating a total of 2.195 billion yuan, indicating strong investor interest [1] - In July, the approval volume of game licenses remained high, with 127 games approved, despite a decrease of 20 from June, maintaining a robust issuance level [1] Group 2 - The gaming sector is undergoing multiple catalysts including AI, content, and commercialization model transformations, with the game ETF tracking the performance of the A-share listed companies in the animation and gaming industry [2] - The annual gaming event ChinaJoy is approaching, presenting potential investment opportunities in the game ETF [2]

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].