Summary of Key Points from Conference Call Records Industry Overview - The conference call discusses the media and entertainment industry, focusing on the film, IP (Intellectual Property), gaming, online music, and AI sectors [1][2][3][4][5][6][7][8][9][10][11][12][13][14][15][16][17]. Core Insights and Arguments Film Industry - The summer box office has shown significant improvement, with national box office revenue increasing by 74% year-on-year in the first two weeks of August, and audience numbers nearly doubling [1][4]. - Key films like "Nanjing Photo Studio" are projected to perform well, with expected box office exceeding 3 billion yuan [4]. - The logic of quality content driving box office demand remains valid, with upcoming films for the National Day holiday expected to sustain this trend [5]. IP Industry - The IP industry is accelerating its development, with companies transitioning from content creators to operators, enhancing their value through diversified revenue streams and vertical integration [1][6]. - Notable companies like Reading Group have seen their IP derivative business grow significantly, with GMV reaching 480 million yuan in the first half of 2025, nearing the total for the previous year [7][17]. Gaming Sector - The gaming sector has exceeded expectations in the first half of 2025, with companies like Xinyou, Huatuo, Perfect World, and Jibite validating the product cycles of mid-sized firms [9]. - Companies are focusing on resource strategies, with NetEase optimizing R&D resources and Xinyou launching one to two new games annually [9][10]. Online Music Industry - The online music industry shows competitive advantages and resilience in profitability, with Tencent Music's SVIP user growth strong, reaching a penetration rate of 12% [3][15][16]. - NetEase Cloud Music is in the early stages of commercialization, with significant improvements in customer acquisition ROI [16]. AI Applications - Discussions around AI applications focus on multi-modal AI, particularly in video models and advertising [11][12]. - The acceptance of AI-generated video by large B-end clients is increasing, with companies like Netflix and Disney utilizing AI tools for video production [11]. - In the AI advertising sector, companies are optimizing ad effectiveness to boost revenue, with platforms like Meta and Weibo highlighting the impact of AI on click-through rates [12]. Other Important Insights - The new policies from the National Radio and Television Administration are expected to benefit the long video and series industry by improving content supply and encouraging innovation [3][13][14]. - Long video platforms and production companies are likely to benefit from these policies, potentially improving cash flow and content quality [14]. - The IP derivative business of Reading Group is still in its early stages, with plans to expand product lines and explore new IP opportunities [17]. This summary encapsulates the key points discussed in the conference call, providing insights into the current state and future outlook of the media and entertainment industry.

Group 1 - The drama "Sweeping Drug Storm" has achieved significant viewership success, with a peak rating of 2.8568% on CCTV and over 700 million total views across platforms, indicating its status as a phenomenon in the summer drama market [2] - The series has maintained high engagement on social media, with viewers expressing excitement and discussing its intricate plot twists, particularly the significance of a candy wrapper in the storyline [2][3] - The character of Lu Shaohua, a high-IQ criminal, is portrayed as a complex individual, with his love for a specific candy, "Da Xia Su," serving as a key narrative element that humanizes him [5][6] Group 2 - The series conveys a strong message about the triumph of justice over evil, emphasizing the importance of quality in storytelling and production within the film industry [6][8] - The backdrop of the story, set in 1995, coincides with a flourishing period for the Chinese candy industry, highlighting the cultural significance of products like "Da Xia Su" during that time [11] - The company behind "Da Xia Su," Ma Dajie Foods, has established itself as a leader in the candy market, achieving nationwide sales recognition and innovating through a combination of traditional craftsmanship and modern technology [11][13]

Core Viewpoint - The company's 1H25 performance shows a decline in revenue and Non-IFRS net profit, but the results are in line with expectations, with a notable growth in other business segments excluding a specific impact from New丽传媒 [1][2]. Financial Performance - In 1H25, the company achieved revenue of 3.191 billion yuan, a year-on-year decrease of 23.9% - Non-IFRS net profit was 508 million yuan, down 27.7%, aligning with the company's forecast of 486 million yuan and Bloomberg's estimate of 484 million yuan [1] - Excluding the impact of New丽传媒, other business segments saw a 35.7% year-on-year growth in Non-IFRS net profit [1] Business Segments - Online business revenue showed a slight increase, with 1H25 online business revenue at 1.985 billion yuan, up 2.3% - Self-owned platform product revenue grew by 3.1%, while Tencent channel revenue fell by 25.6% due to a significant drop in MAU, attributed to a strategic shift towards paid reading products [1] - IP operation revenue in 1H25 was 1.205 billion yuan, down 46.4%, primarily due to no new series from New丽传媒 in the first half of the year [1][2] - The GMV for IP derivative products reached 480 million yuan, nearing the total of 500 million yuan for the previous year [1] Profitability and Cost Management - The company's gross margin in 1H25 was 50.5%, reflecting a year-on-year increase of 0.5 percentage points - The reduction in sales expenses was due to fewer film projects, leading to decreased promotional and advertising costs [2] - Management expenses also saw a slight year-on-year decline, indicating a more restrained approach [2] Future Outlook - The company has a rich reserve of series from New丽传媒, with several projects scheduled for release in 2025, including "扫毒风暴" and others [2] - The short drama business is set to expand, with over 2,000 web novel IPs being utilized to create high-quality short dramas [3] - The company plans to enhance its IP derivative product offerings, with a significant increase in the speed of new product launches [3] Valuation and Estimates - The company maintains its Non-IFRS net profit forecasts for 2025 and 2026 - Current price corresponds to 21.2x and 18.4x Non-IFRS P/E for 2025 and 2026, respectively - The target price is set at 43.5 HKD, indicating a potential upside of 39.4% based on 30x and 26x Non-IFRS P/E for 2025 and 2026 [3]

Drama Section - The drama market is vibrant with both new and old works performing well during the summer season of 2025, with "In the Name of the Law" initially leading but later overtaken by "Drug Storm" [1][2] - "In the Name of the Law" scored 93.74, maintaining high viewership and social media engagement, but its Douban rating fell to 6.9 due to controversial ending [2][14] - "Drug Storm" saw a significant rise in ratings, achieving a peak Douban score of 8.0 and a daily viewership increase from 750,000 to over 3 million, becoming the second most-watched show [8][9] - Other notable dramas include "Morning Snow Record," "Mortal Cultivation," and "Splendid Blossoms," all of which performed well in various metrics [2][16] Variety Show Section - The travel exploration variety show "Earth Super Fresh" quickly rose to the top of the ratings, outperforming other shows like "Running Man Season 9" [19] - Three comedy variety shows, "Talk Show and Friends Season 2," "Comedy King Solo Season 2," and "Mahua Special Happiness Season 2," also ranked in the top five, indicating sustained popularity [22] - The increase in female comedians and topics related to women's issues in the comedy shows has contributed to their success, with a notable rise in female representation [22][23] - The new cooking show "One Meal to the Gods" faced plagiarism allegations, drawing attention for its similarities to the Netflix show "Black and White Chefs" [24][29]

Core Insights - The long drama market is experiencing a new round of competition with the release of several series, but the summer season is not as "hot" as expected, indicating a cooling trend in the market [1][3][5] Group 1: Market Performance - The leading series in the summer season, "In the Name of the Law," has an average viewership of approximately 50 million, while "Ling Jiang Xian" and "Shu Juan Yi Meng" are performing lower in market influence [3][6] - The top three series in the first half of 2025 were "Da Feng Da Geng Ren," "Cang Hai Chuan," and "Guo Se Fang Hua," with the highest viewership at 1.93 billion, which ranks fifth in 2024 [3][4] - The overall performance of the long drama market is declining, with fewer standout hits compared to previous years [3][5] Group 2: Genre Trends - The summer season has seen a diverse range of genres, including youth ensemble, historical entrepreneurship, fantasy adventure, ancient romance, and judicial crime dramas, indicating a shift from the dominance of ancient dramas [5][6] - Judicial crime dramas, particularly "In the Name of the Law" and "Drug Storm," have gained significant popularity and critical acclaim, suggesting a potential shift in audience preferences [6][9] Group 3: Audience Reception - Despite some series achieving high viewership, their ratings on platforms like Douban are not as impressive, indicating a disconnect between popularity and quality [9][19] - The ancient drama genre still holds a significant market share, with several series like "Ling Jiang Xian" and "Shu Juan Yi Meng" performing well in terms of viewership, although they do not match the success of previous years [6][9] Group 4: Industry Dynamics - The market is witnessing a debate over the standards for what constitutes a "hit" series, with platforms like iQIYI emphasizing the importance of comprehensive metrics for evaluating content popularity [15][19] - The trend of releasing similar genre series in succession rather than direct competition is becoming more common among platforms, aiming to capitalize on existing viewer interest [12][13]

Core Viewpoint - The drama "Drug Storm" aims to present a sense of the times and destiny rather than just a story of police catching drug dealers [1] Group 1: Audience Reception and Performance - "Drug Storm" achieved a peak viewership rating of 4.0935%, making it the hottest drama of the summer season [2] - The show reached a total audience of 4.164 billion across all media platforms, with a total viewing time of 558 million hours, and 36.4% of viewers being young users [2] Group 2: Creative Team and Background - The director, Five Hundred, has a strong track record with previous successful works, and the writer, Chen Yuxin, has extensive experience in drug-related themes [2][3] - The story is based on the shocking Liu Zhaohua case, where 12.36 tons of new-type ice drugs were seized, significantly exceeding the total global seizure amount from the previous year [2] Group 3: Thematic Elements - The drama emphasizes the historical context of drug control in China, showcasing the transition from a nation plagued by opium to one with a zero-tolerance policy towards drugs [5] - The narrative structure employs dual protagonists, with the characters representing both law enforcement and drug trafficking, highlighting the complexities of the drug trade [6][8] Group 4: Narrative Style and Challenges - The show features a fast-paced narrative that intertwines multiple storylines, which may lead to confusion among viewers [11] - The portrayal of the psychological struggles faced by drug enforcement officers is a central theme, emphasizing the difficulties of identifying and apprehending criminals [8][11]

Core Viewpoint - The article emphasizes the importance of drug-related themes in film and television, highlighting the ongoing societal issues surrounding drug abuse and the dedication of law enforcement in combating this problem [4][7]. Group 1: Historical Context and Development - The article discusses the evolution of drug-related narratives in Chinese media, starting from "The Mekong River Case" to "Ice Breaking Action" and now "Drug Storm," showcasing the persistent relevance of these themes [4][6]. - The narrative of "Drug Storm" is set against the backdrop of the late 1990s to early 2000s, a period when drug issues became increasingly complex in China, with the emergence of synthetic drugs [6][7]. Group 2: Creative Process and Themes - The creative process involved extensive research and interviews with frontline police officers to accurately depict the challenges faced in drug enforcement [6][7]. - The article highlights the shift in storytelling from merely resolving cases to exploring the psychological and emotional struggles of law enforcement officers, emphasizing the weight of their experiences [6][7]. Group 3: Societal Impact and Responsibility - The article argues that drug-related themes are crucial for raising awareness about the dangers of drug use and the sacrifices made by law enforcement, portraying it as a societal responsibility to combat drug abuse [7][8]. - It stresses the need for continuous storytelling in this genre to remind society of the hidden battles against drug trafficking and the importance of resisting drug use [7][8].

Core Viewpoint - The article emphasizes the importance of drug-related themes in film and television, highlighting the ongoing societal issues surrounding drug abuse and the dedication of law enforcement in combating this problem [2][5]. Group 1: Historical Context and Development - The creation of the series "Mekong River Case" began in 2013, inspired by a tragic event where 13 Chinese sailors were murdered in the Golden Triangle, showcasing the sacrifices of anti-drug police [2]. - "Breaking Ice" was developed in 2019, focusing on a specific anti-drug operation in Guangdong, where a small village produced one-third of the country's methamphetamine, illustrating the complexities of drug-related crime [3]. - "Drug Storm" represents a retrospective look at the evolution of drug issues in China from the late 1990s to the early 2000s, highlighting the emergence of synthetic drugs and the challenges faced by law enforcement [4]. Group 2: Themes and Messages - The narrative of "Drug Storm" is not just about current anti-drug efforts but reflects on the historical struggles and sacrifices made by police during a time when drug manufacturing became more sophisticated [4]. - The series aims to portray the psychological battles and the difficulties in identifying criminals, rather than just focusing on the resolution of cases [5]. - The recurring theme of drug-related narratives serves as a reminder of the societal impact of drugs, emphasizing the collective responsibility to resist drug use and support law enforcement efforts [5].

Core Viewpoint - The series "Sweeping Drug Storm" has garnered significant attention and acclaim, showcasing the complexities of drug enforcement and the human condition, while effectively engaging the audience with its intricate storytelling and character development [5][10][29]. Group 1: Audience Reception and Ratings - "Sweeping Drug Storm" achieved a peak viewership of over 28,000 on Tencent Video, securing its place in the "Must-Watch Club" [5]. - The series holds a Douban rating of 7.9, making it one of the highest-rated domestic dramas recently [5]. Group 2: Narrative Structure and Themes - The show employs a "six-line parallel" narrative style, exploring the complexities of human nature through the lens of drug enforcement, ultimately emphasizing the importance of preventing drug trafficking [9][10]. - The narrative is set against the backdrop of the 1990s, a pivotal time when new forms of drugs began infiltrating China, highlighting the evolving challenges faced by law enforcement [10][29]. Group 3: Character Development - The characters in "Sweeping Drug Storm" are portrayed with depth, avoiding simplistic good vs. evil dichotomies, which enhances the realism of the narrative [16][22]. - The protagonist, Lin Qiangfeng, is depicted as a flawed hero, embodying both courage and vulnerability, which resonates with the audience [17][20]. Group 4: Societal Context and Realism - The series reflects the societal changes during the transition from a planned economy to a market economy, illustrating how these shifts have impacted individual lives and contributed to the rise of drug-related issues [29][31]. - The portrayal of drug-related violence and its effects on ordinary people underscores the urgent need for awareness and action against drug abuse [15][36]. Group 5: Production Quality and Artistic Choices - "Sweeping Drug Storm" balances traditional documentary-style realism with vibrant cinematography, enhancing the storytelling experience [34][36]. - The series effectively integrates historical context and visual elements to create a compelling narrative that resonates with contemporary audiences [31][34].

Group 1 - The company predicts a Non-IFRS net profit of 486 million yuan for 1H25, with a revenue forecast of 3.126 billion yuan, representing a year-on-year decline of 25.4% [1] - Online business revenue is expected to remain stable at 1H25, with an estimated income of 1.957 billion yuan, showing a year-on-year change of approximately 0% [1] - The copyright operation business is projected to generate 1.169 billion yuan in revenue for 1H25, down 48% year-on-year, primarily due to the absence of series releases from New Classics Media in the first half [1] Group 2 - The company is focusing on the development of IP derivative products, with key IPs including "Full-Time Expert" and "Fox Demon Little Red Lady" [2] - The company has expanded its distribution channels to major cities and plans to deepen cooperation with the plush toy brand "Super Vitality Factory" to launch new product lines in the second half of 2025 [2] - Due to adjustments in the short drama cooperation accounting model, revenue forecasts for 2025 and 2026 have been reduced by 4% and 5% respectively, while maintaining Non-IFRS net profit predictions [2]