Core Insights - The gaming sector is experiencing volatility, with the gaming ETF (159869) declining over 1.5% as of October 16, 2025, despite a net inflow of 2.394 billion yuan over the past 10 trading days, indicating strong investor interest [1][2] - The Chinese domestic gaming market revenue for August 2025 is projected at 29.263 billion yuan, reflecting a year-on-year decline of 13.01%, primarily due to the waning popularity of last year's hit game "Black Myth: Wukong" and a lack of new product supply [1][2] - The overseas market for self-developed Chinese games saw actual sales revenue of 1.68 billion USD in August 2025, down 10.66% year-on-year, attributed to a high base effect from the previous month [1][2] Domestic Market Performance - The mobile gaming market in China generated 21.541 billion yuan in August 2025, showing a year-on-year decrease of 4.25%, with new releases contributing over 200 million yuan in revenue [1] - The client game market in China reached 6.563 billion yuan in August 2025, marking a year-on-year increase of 17.59%, driven by new cross-platform products [1][2] Overseas Market Highlights - In the top 10 overseas market products by revenue growth, "Kingshot" and "Frost Revelation" from Diandian Interactive ranked in the top 5, with "Kingshot" experiencing over 20% month-on-month revenue growth [2] - The domestic version of "Kingshot" is expected to launch within the year, potentially expanding revenue opportunities [2] Investment Opportunities - The gaming sector is undergoing transformations driven by AI, content, and commercialization model changes, presenting potential investment opportunities in the gaming ETF (159869), which tracks the performance of A-share listed companies in the animation and gaming industry [2]

Core Insights - The 2025 Tokyo Game Show has seen significant attendance and interest in both domestic and international games, highlighting the growing popularity of Chinese games abroad [1][2][4] - Chinese games have made notable achievements in international markets, with several titles receiving awards and achieving high user engagement [4][20] - The gaming industry is experiencing a shift towards "mini-games" and innovative marketing strategies, which are proving successful in retaining users and generating revenue [5][10][24] Group 1: Event Highlights - The Tokyo Game Show 2025 opened on September 25, attracting large crowds and long queues for popular titles like "Persona 3 Reload" and "Nintendo Switch 2" [1] - Domestic Chinese games also drew significant attention, with players struggling to secure demo tickets for titles like "Arknights: End of the World" [2] Group 2: Chinese Games' International Success - "Whiteout Survival" has achieved over $3.3 billion in revenue within two years of its overseas launch, showcasing the potential of Chinese strategy games in international markets [5] - The game has a retention rate of 42% and a monthly retention rate of 8%, significantly higher than the average for similar games [5] - "Kingshot," another SLG game, generated $75 million in revenue within four months of its launch, indicating a trend of successful mini-games in the market [5][6] Group 3: Marketing and User Engagement - The success of "Whiteout Survival" is attributed to its innovative gameplay that combines light and heavy SLG elements, enhancing user retention [6][8] - The game has successfully attracted a diverse player base, with over 20% of its users being female, breaking traditional gender norms in the SLG genre [8] - Marketing strategies have evolved, with games utilizing platforms like TikTok and YouTube for targeted advertising and local cultural integration [10] Group 4: Performance of Otome Games - "Love and Deep Space" has set a record for Chinese otome games, generating nearly 6 billion RMB globally, with 64% of revenue from the Chinese market [11][13] - Despite its success, the game has faced a decline in revenue, with a 73% drop in the week following its peak [14][16] - The game's lack of engaging content and updates has led to player dissatisfaction, impacting its overall performance [16] Group 5: Industry Growth and Future Prospects - In 2024, China's game export revenue reached $18.56 billion, accounting for nearly 40% of the domestic market, reflecting significant growth over the past decade [20] - Major companies like Tencent and NetEase are leading the charge in overseas markets, focusing on localization and strategic investments [20][21] - The gaming industry is witnessing a diversification of successful titles, with both "mini-games" and high-quality productions finding their place in the global market [27][28]

Summary of the Conference Call Company and Industry Overview - The conference call discusses Century Huatong and its subsidiary, Diandian Interactive, focusing on the SLG (Simulation and Strategy Game) market, which holds over 14% of the global market share and is expected to grow at approximately 20% year-on-year from 2024 to the first half of 2025 [2][4]. Key Points and Arguments - Diandian Interactive is a leader in the SLG gaming industry, with its flagship game "Frosty Apocalypse" generating annual revenue between 20 billion to 25 billion RMB, while another title, "Bouncing Kingdom," is projected to reach 10 million USD in overseas monthly revenue by August [2][4]. - The combined annual revenue from these two products is expected to exceed 35 billion RMB [2][4]. - The SLG gaming sector has evolved from gameplay iteration to user diversification, with user acquisition becoming a primary growth driver since 2020, despite traditional SLG games facing challenges in user acquisition and retention [2][6]. - Diandian Interactive has innovated with the "SLG+X" formula, merging simulation management with SLG elements, utilizing cartoon art styles and apocalyptic themes to reduce user acquisition costs and enhance retention [2][10]. Development Trends and Innovations - The SLG market has seen significant innovations since 2014, with key titles introducing new gameplay mechanics. However, since 2020, the industry has relied more on user acquisition innovations rather than gameplay innovation [8][9]. - Traditional SLG games have struggled with user retention due to core gameplay being less engaging initially, leading to lower early retention rates [8][9]. - The introduction of casual elements and secondary gameplay has helped some companies improve user acquisition costs, but retention remains a challenge [9]. Future Outlook - Diandian Interactive is currently in a growth phase, with expectations of sustained revenue growth and profit increases over the next 1 to 3 years [7][11]. - The company is benefiting from a favorable cycle in both product and category, with its successful titles in long-term operation, indicating potential for continued revenue growth [3][11]. - The innovative approach of combining SLG with simulation management is expected to yield further success, as evidenced by the performance of "Endless Winter" and other titles [10][11]. Additional Important Insights - The SLG market primarily attracts middle-aged males interested in historical military themes, but the introduction of more diverse gameplay and themes is broadening the user base [5][6]. - The high payment characteristics of SLG games, with monthly spending typically ranging from 600 to 800 RMB, indicate a high user value, albeit with high acquisition costs [6]. This summary encapsulates the key insights from the conference call regarding Century Huatong and the SLG gaming industry, highlighting growth opportunities, challenges, and innovative strategies.

Investment Rating - The report maintains a "Positive" investment rating for the gaming industry [7]. Core Insights - The Chinese gaming market continues to grow at a high speed, with multiple new games contributing to incremental growth. The market size in May reached 28.051 billion yuan, showing a year-on-year increase of 9.86% and a month-on-month increase of 2.56% [4][10]. - Several self-developed games, such as "Kingshot," have performed well in overseas markets, indicating a strong outlook for game exports. The actual sales revenue of Chinese self-developed games in overseas markets was 1.577 billion USD in May, up 6.93% year-on-year [10]. - The issuance of game licenses has reached a recent high, with 158 licenses granted in June, including 147 domestic and 11 imported games, signaling positive policy support for the industry [10]. - The upcoming summer game release cycle is expected to sustain high industry prosperity, with several new titles from listed gaming companies showing strong performance [10]. - The combination of new game cycles, favorable policies, and advancements in AI technology is expected to enhance the valuation of the gaming sector, making it a focal point for investment opportunities [10]. Summary by Sections Market Performance - The gaming market in China maintained a robust growth trajectory, with May's market size at 28.051 billion yuan, reflecting a year-on-year growth of 9.86% and a month-on-month growth of 2.56% [4][10]. - Mobile games contributed significantly, with a market size of 21.177 billion yuan in May, showing a year-on-year increase of 11.96% [10]. New Game Releases - Multiple new games have shown strong performance, with titles like "杖剑传说" and "超自然行动组" achieving significant revenue in their initial months [10]. - The summer release cycle is anticipated to further boost the gaming sector's fundamentals [10]. Policy Support - Recent policy initiatives have been introduced across various regions to support the gaming industry, including measures to enhance game exports and promote AI integration [10]. - The issuance of game licenses in June has set a new record since the resumption of approvals in 2022, indicating a stable and supportive regulatory environment [10]. AI Integration - Companies are making progress in integrating AI with gaming, with notable developments such as the upcoming launch of AI-driven gaming applications [10]. - The report highlights the potential for AI to catalyze growth within the gaming sector, enhancing both product offerings and operational efficiencies [10].