Summary of Shenzhou Taiyue Conference Call Company Overview - **Company**: Shenzhou Taiyue - **Industry**: Gaming and Software Development Key Financials - **Revenue**: 1.36 billion CNY, a quarter-on-quarter increase of 2.85% [2] - **Net Profit**: 270 million CNY, a quarter-on-quarter increase of 13.45%, indicating steady improvement in overall profitability [2] - **First Half of 2025**: Revenue of 2.685 billion CNY, a year-on-year decrease of 12%; net profit of 509 million CNY, a year-on-year decrease of 19.26% [3] Gaming Business Insights - **Revenue Source**: 92% of revenue comes from the overseas gaming market, with North America contributing approximately half [2][12] - **Upcoming Games**: Two games, DL and LA, are nearing launch on the Apple Store, with three additional SL products expected to enter commercialization testing in Q1 and Q2 of 2026 [2][4][8] - **Existing Games**: The games "Sunrise City" and "War Fire and Order" are performing well, with stable revenue maintained through frequent updates and consistent investment [6] Software Business Developments - **Abox Smart Voice Robot**: Launched with a subscription model based on call duration, showing good market feedback and plans for international expansion [5][7] - **Productization and Internationalization**: The software segment is experiencing continuous growth, with a focus on productization and international outreach [5][11] Market Strategy and Trends - **New Product Development**: The company is accelerating the pace of new product launches, integrating various themes and gameplay styles to capture the expanding SLG market [10] - **Cultural Elements**: Games incorporate Chinese cultural elements, which have been well-received by overseas players [13][14] - **Competitive Landscape**: The SLG market is highly competitive, with established players dominating due to their understanding of overseas player preferences [14] Future Outlook - **Game Development Focus**: Emphasis on refining product quality and learning from successful market examples to enhance new product offerings [15][16] - **Profitability of Software Products**: The subscription model for Everbox is expected to yield high profit margins, with a focus on customer feedback and demand growth [17][18] - **Domestic Market Plans**: Domestic versions of games have been completed and are expected to launch soon, aligning closer with overseas release schedules [19]

Summary of Conference Call on Gaming Industry Investment Opportunities Industry Overview - The gaming industry is benefiting from tax incentives, relaxed refinancing policies, and local government support, particularly in regions like Guangzhou and Zhejiang, which have introduced favorable regulations for industry development [1][2][4]. Core Insights and Arguments - **New Game Cycle Performance**: The new game cycle has exceeded expectations, with notable performances from Giant Network's "Supernatural Action Group" and G-bits' "Wandao" and "Sword of the Xuanyuan," indicating potential upward adjustments in annual revenue and performance for 2025 [1][2]. - **AI Product Integration**: The acceleration of AI product implementation is significant, with the founder of Mihayou launching AI-native games, Tencent reporting increased product usage time after AI integration, and companies like Kain and Giant conducting AI commercialization tests, all contributing to sector growth [1][2][4]. - **Market Growth Data**: The domestic gaming market saw a year-on-year growth of over 20% in April, with leading companies like Tencent and data from the gaming committee reflecting high industry prosperity, contradicting previous market stagnation expectations [3][4]. - **Supportive Government Policies**: Since March 2025, various government levels have introduced supportive policies, including a framework for network publishing and technology innovation, creating a conducive environment for the gaming industry [4]. Future Development Trends - The future outlook for the gaming industry is optimistic, driven by supportive policies and technological advancements. The SLG (Simulation and Strategy Game) segment is highlighted for its long-term operational characteristics, with products like Shenzhou Taiyue's "Sunrise City" achieving peak revenue in its fifth year [4][6]. - The commercialization of AI is expected to further propel industry growth, with an optimistic forecast of two to three new game launches annually over the next few years, effectively mitigating the volatility of performance cycles [4]. Recommended Companies for Investors - The following companies are recommended for investment: Tencent, Century Huatong, Kain, Giant Network, G-bits, and Perfect World. Additionally, smaller but promising companies such as Shengtian Network, Iceberg Network, and Dihun Network are also worth attention [5]. Importance of SLG Segment - The SLG segment holds a crucial position in the current market due to its ability to provide stable revenue through long-term operations. Companies like Kain, Giant, and G-bits are planning to expand into this segment, which will help address past performance volatility and support long-term valuation [6].

Summary of Shenzhou Taiyue Conference Call Company Overview - Shenzhou Taiyue's revenue primarily comes from the gaming sector, with Kemu Games contributing approximately 80% of revenue and over 100% of profits, highlighting its core role in the company's profitability [2][3][4] Key Points and Arguments - **Revenue and Profit Growth**: In 2024, Shenzhou Taiyue achieved revenue of approximately 6.5 billion yuan, a year-on-year increase of nearly 10%. Profit reached 1.43 billion yuan, a year-on-year growth of 60% [3] - **Business Structure**: The main business segments include gaming and computer sectors. The gaming segment is the primary source of revenue and profit, with Kemu Games being the key contributor. The computer segment has shown gradual improvement following restructuring [4] - **AI and Cloud Business Growth**: Significant development in AI and cloud businesses, with AI revenue more than doubling in 2023. This growth indicates potential for diversified business expansion [4][5] - **New Product Launches**: In 2025, Shenzhou Taiyue plans to promote two new games, codenamed DL and OLOA, which are currently in the data adjustment phase. Successful launches could significantly boost revenue and profits [2][6] - **Old Product Performance**: Existing games, "Sunrise City" and "Account Order," have seen reduced launches since February 2024 due to increased competition in the overseas strategy game market. Despite a slight decline in revenue from January to May 2025, the impact is limited due to the long lifecycle and stable revenue of strategy games [2][7] - **Future Performance Expectations**: For 2025, the computer business is expected to contribute incremental profits, while the gaming business is approached with caution. Increased new product launches may pressure profits in the short term, but successful performance could lead to significant revenue and profit growth in 2026 and beyond [8][9] Additional Important Insights - **Investment Value Assessment**: The success of new game launches and the performance of existing games are critical factors in evaluating Shenzhou Taiyue's investment value [4] - **Long-term Outlook**: Continuous monitoring of old product performance and new product development is essential, along with potential capacity enhancements that could provide new growth opportunities [9]

Summary of Shenzhou Taiyue's Conference Call Company Overview - **Company**: Shenzhou Taiyue - **Industry**: Mobile Gaming Key Financials - **2024 Total Revenue**: 64.52 billion CNY, up 8.22% YoY - **2024 Net Profit**: 14.28 billion CNY, up over 60% YoY - **2024 Game Revenue**: 46.62 billion CNY, with overseas revenue exceeding 50% - **Key Titles**: "Sunrise City" contributed 34 billion CNY, "War Fire and Order" contributed 10 billion CNY - **Q1 2025 Revenue**: 13.23 billion CNY, with a net profit of 3.29 billion CNY, slightly down YoY due to peak performance in the previous year [2][3] Game Development and Strategy - **New Game Releases**: Plans to launch two new SLG mobile games (code-named DL and LVA) in H2 2025, with three additional SLG games expected by Q2 2026, accelerating release cadence to five games per year [2][5] - **Long-term Strategy**: Commitment to long-term operation of SLG games, anticipating stable revenue and profit from new titles [2][5] - **Market Focus**: 50% of game revenue comes from North America, primarily the U.S. [4][11] Business Segments - **Server Cluster Business**: Achieved breakeven last year, expected to improve further this year [6] - **Cloud and AI Services**: Integration of cloud and AI services aimed at supporting Chinese companies going global, serving over 300 clients [6][17] - **SaaS Revenue**: Accounts for approximately 40%-50% of cloud business revenue, with double-digit growth in recent years [17] Regulatory and Market Environment - **Government Policies**: Encouragement of game exports positively impacts business development and improves market sentiment, increasing industry valuation confidence [7] - **U.S. Court Ruling**: Monitoring the ruling allowing bypassing Apple's iOS store for payments, which could reduce costs and enhance profitability [8] Game Performance Insights - **"Sunrise City"**: Revenue fluctuated significantly in 2024 due to competition, with a focus on ROI leading to reduced marketing spend [9] - **"War Fire and Order"**: Maintained stable revenue performance [9] Future Outlook - **2025 Revenue and Profit Projections**: Dependent on the performance of key products and new releases, with a focus on maintaining revenue stability and effective marketing strategies [18] - **Governance Structure**: Highlighted as a strong foundation for future growth [19] Additional Notes - **Art Production Costs**: Art production accounts for about 40% of game development costs, with improved third-party tools enhancing efficiency [16] - **Non-SLG Game Development**: Exploring non-SLG products while maintaining focus on core SLG offerings [13] This summary encapsulates the key points from the conference call, providing insights into Shenzhou Taiyue's financial performance, strategic direction, and market environment.

Investment Rating - The report maintains a "Buy" rating for the company, indicating an expected stock price increase of over 15% compared to the benchmark index [5]. Core Insights - The company achieved a revenue of 6.452 billion yuan in 2024, representing an 8.22% year-on-year increase, and a net profit of 1.428 billion yuan, which is a 60.92% increase year-on-year [2]. - The gaming business continues to show stable growth, with the main mobile games generating significant revenue, while new games are expected to contribute to future performance [3]. - The software and IT services segment also demonstrated stable growth, integrating advanced technologies such as AI and IoT into its offerings [4]. Financial Performance Summary - In 2024, the company reported a revenue of 64.52 billion yuan, with a year-on-year growth of 8.22%, and a net profit of 14.28 billion yuan, up 60.92% year-on-year [2]. - For Q1 2025, the company recorded a revenue of 1.323 billion yuan, a decrease of 11.07% year-on-year, and a net profit of 239 million yuan, down 19.09% year-on-year [2]. - The company plans to distribute a cash dividend of 1 yuan per 10 shares to all shareholders [2]. Business Segment Performance - The gaming segment, particularly through its subsidiary Shellwood Games, ranked 9th globally among mobile game publishers in 2024, with significant revenue contributions from established titles [3]. - The software and IT services segment generated revenues of 1.478 billion yuan from AI/ICT, 133 million yuan from IoT/communications, and 150 million yuan from innovative services, showing year-on-year growth rates of 20.53%, 62.30%, and 27.05% respectively [4]. Future Earnings Forecast - The company is projected to have earnings per share (EPS) of 0.67 yuan, 0.75 yuan, and 0.81 yuan for the years 2025, 2026, and 2027 respectively, with corresponding price-to-earnings ratios of 16, 15, and 14 [5].