Industry Trends - The September mobile game overseas revenue ranking was released, with Point Cloud Interactive's "Whiteout Survival" and "Kingshot" taking the top two spots [2] - Tencent and Ubisoft jointly established a new studio, Vantage Studios, which will be responsible for the development and operation of core IPs such as "Assassin's Creed" [3] - Century Games, a subsidiary of Century Huatong, rose from 7th to 1st place in the global Top 50 mobile game companies ranking [4] Company Developments - The actual controller and chairman of Dianhun Network, Hu Jianping, completed a reduction of 4.8692 million shares, cashing out 101 million yuan, with a total reduction exceeding 200 million yuan in six months [5][6] - Tencent subsidiary Funcom announced a round of layoffs and restructuring as it transitions from game development to long-term operations [7] - NetEase's MMO studio, Fantastic Pixel Castle, led by veteran producer Greg Street, is facing significant operational crises and potential layoffs [10] Compliance and Regulatory Issues - Discord confirmed that approximately 70,000 users' identity information and photos may have been leaked due to a hacker attack on a third-party supplier [11] Mergers and Acquisitions - EA announced it will be acquired in an all-cash transaction by a consortium led by Saudi Arabia's Public Investment Fund, with a total price of approximately 55 billion USD [12] - Microsoft reaffirmed its commitment to the development of the next-generation Xbox console amid rumors of cancellation [13] Esports Highlights - LCK team BFX won the Asian Invitational Championship by defeating DK with a score of 3:2 [14] - The 2026 Esports World Cup announced its main event projects, including popular titles like League of Legends and DOTA2 [15]

Core Viewpoint - The media and gaming industry is benefiting from the AI technology wave and the trend of going overseas, with a focus on Hong Kong-listed internet giants and AI agents [1] Group 1: AI Technology Impact - AI applications need to grasp emotional rhythms, emphasizing the importance of monitoring developments in major internet companies and AI agents [1] Group 2: Gaming Sector Performance - The gaming sector shows strong performance, with domestic gaming revenue maintaining double-digit growth, driven by new games like "Delta Action" and enduring titles like "Honor of Kings" [1] - The overseas market is experiencing significant growth, propelled by titles from Supercell and "Sand Dune: Awakening" [1] Group 3: Industry Trends - The overall industry is experiencing a technological boom, coupled with expectations of increased capital inflow, suggesting that the growth trend is likely to continue [1] Group 4: Gaming ETF Overview - The gaming ETF (516010) tracks the animation and gaming index (930901), which selects listed companies involved in animation production, game development, platform operation, and related industries to reflect the overall performance of the sector [1] - This index focuses on innovation and growth within the animation and gaming fields, covering the entire industry chain from content creation to distribution channels, showcasing distinct industry representation and market vitality [1]

Core Points - The new installment of the "Gu Jian Qi Tan" series, titled "Gu Jian," has been announced by Shanghai Zhulong, marking the first new single-player game in the series since "Gu Jian Qi Tan 3" was released in November 2018 [2][3] - The teaser for "Gu Jian" has garnered over 10 million views on Bilibili as of August 21 [2] - The game is set to feature a new protagonist, a "Yin Yang Judge," who uses a "Book of Life and Death" to interact with souls, emphasizing a unique narrative that does not require players to have played previous installments [4][5] Company Overview - Shanghai Zhulong was established in 2007 and is known for its narrative-driven games that draw heavily from Chinese folklore and mythology [2][6] - The company has diversified its portfolio with various game types, including an MMO and a long-term service model game, while maintaining a focus on single-player RPGs [3][6] Investment and Development - "Gu Jian" was initiated in 2021, with Tencent's investment in early 2024 allowing for team expansion and development acceleration, leading to a production phase of approximately two years [6] - Tencent increased its stake in Shanghai Zhulong's parent company, Beijing Wangyuan Shengtang Entertainment Technology Co., from 44.27% to 87.36%, becoming the largest shareholder [6] Market Trends - The announcement of "Gu Jian" coincides with a surge of large single-player games being revealed, indicating a growing interest in this genre within the domestic market [9][10] - The success of "Black Myth: Wukong" has positively influenced consumer spending on other console games, with 66.7% of surveyed users purchasing additional titles alongside it [10]

Group 1 - The Cologne International Game Show, the largest gaming exhibition globally, is currently being held in Cologne, Germany, with over 1,500 exhibitors from 72 countries, marking an 11% increase from last year [1] - More than 50 Chinese gaming companies are participating, including Tencent, MiHoYo, and others, representing a 32% growth compared to the previous year [1] - Notable Chinese games such as "Honor of Kings World," "Delta Action," and "Arknights: End of the World" have released new promotional materials at the event [1] Group 2 - Tencent's subsidiary, Salors, showcased "Destiny Trigger," introducing new breakthroughs in tactical shooting games [2] - Tencent's international gaming brand, Level Infinite, presented four products, including "Dying Light: The Beast" and "PUBG MOBILE" at the exhibition [2] - The event attracted game developers and technical teams from around the world, with Tencent's AI creative solution, VISVISE, making its debut [2]

Summary of Key Points Core Viewpoint - The Hong Kong stock market experienced significant net inflows from Northbound trading, with a total net buy of HKD 51.66 billion on August 22, 2023, indicating strong investor interest in certain stocks while others faced net sell-offs [1]. Group 1: Stock Performance - Kuaishou-W (01024) received the highest net buy of HKD 11.72 billion, supported by its strong Q2 earnings report showing a revenue of HKD 350.5 billion, a year-on-year increase of 13.1%, and an adjusted net profit of HKD 56.2 billion, up 20.1% [4]. - Semiconductor stocks showed mixed results, with SMIC (00981) and ZTE Corporation (00763) gaining net buys of HKD 10.92 billion and HKD 3.16 billion respectively, while Hua Hong Semiconductor (01347) faced a net sell of HKD 7.5 billion [5]. - Meituan-W (03690) attracted a net buy of HKD 10.08 billion, bolstered by its international expansion efforts, including the launch of its food delivery brand Keeta in Qatar [5]. Group 2: Notable Transactions - Tencent (00700) saw a net buy of HKD 4.61 billion, driven by a 17% year-on-year increase in domestic game revenue to HKD 404 billion in Q2 [6]. - Xiaopeng Motors-W (09868) experienced a significant net sell of HKD 13.08 billion, following a 13% surge in its stock price, as investors took profits [7]. - Alibaba-W (09988) recorded a net buy of HKD 3.85 billion, while Xiaomi Group-W (01810) faced a net sell of HKD 9.02 billion [7].

Core Insights - The Gamescom event in Cologne, Germany, has set a record with over 1,500 exhibitors from 72 countries, marking an 11% increase from last year [1] - More than 50 Chinese companies are participating, representing a 32% growth compared to the previous year, with notable firms like Tencent and miHoYo [2] Group 1: Event Highlights - The event features major game releases, including the highly anticipated "Black Myth: Wukong," which received enthusiastic applause during the Opening Night Live [2] - Tencent's "Delta Action" is the first self-developed FPS game from China to support cross-platform data sharing and global distribution [2] - Various Chinese games, such as "Gujian," "Honor of Kings World," and "Tomorrow's Ark: End of the World," showcased new trailers and updates during the event [2] Group 2: Exhibitor Presence - Tencent's booth for "Honor of Kings World" attracted significant attention, with players queuing to try the game [3] - Lingyoufang's "Shadow Blade Zero" featured a 500 square meter experience area, allowing players to engage in challenging boss battles [6] - Tencent's subsidiary, Salros, presented "Fate Trigger," which combines anime aesthetics with tactical gameplay, while Level Infinite showcased multiple titles including "Dying Light: The Reckoning" [9] Group 3: New Game Releases - "Rust Mobile," a mobile adaptation of the classic PC survival game, was available for public testing, maintaining the core gameplay elements of exploration and PvP combat [10] - Tencent's "Silicon Universe," now titled "Interstellar Ideal Country," offers a sandbox adventure experience with cross-platform capabilities [10] - The AI creative solution VISVISE was unveiled, covering various aspects of game art production and attracting interest from international developers [11]

Investment Rating - The report maintains a "Buy" rating for Tencent Holdings [1] Core Views - The company's performance exceeded expectations, driven by international gaming and AI-enhanced advertising effectiveness [2][9] - The report highlights strong revenue growth across various segments, with a focus on the integration of AI in gaming and advertising [9][40] Summary by Sections 1. Revenue and Profit Performance - In Q2 2025, Tencent achieved total revenue of 184.5 billion yuan, a year-on-year increase of 14.5%, surpassing Bloomberg's consensus estimate of 178.9 billion yuan [14] - Non-IFRS net profit reached 63.05 billion yuan, up 10.0% year-on-year, also exceeding expectations [14] 1.1 International Gaming Revenue - The network gaming segment generated 59.2 billion yuan, a 22.1% increase year-on-year, outperforming the expected 56.14 billion yuan [19] - The international gaming market contributed 18.8 billion yuan, growing 35.3% year-on-year, driven by titles from Supercell and PUBG Mobile [20] 1.2 Social Network Revenue - Social network revenue was 32.2 billion yuan, up 6.3% year-on-year, benefiting from mobile game virtual goods and video live streaming services [23] 1.3 Advertising Revenue - Advertising revenue reached 35.76 billion yuan, a 19.7% increase year-on-year, driven by improvements in AI advertising platforms and the WeChat ecosystem [25] 1.4 Financial Technology and Enterprise Services - Financial technology and enterprise services revenue was 55.54 billion yuan, a 10.2% increase year-on-year, supported by growth in consumer loans and business payment activities [29] 2. User Engagement Metrics - WeChat's monthly active users (MAU) grew to 1.411 billion, a 2.9% year-on-year increase, while QQ's MAU declined to 532 million, a 6.8% decrease [31] 3. Margin Improvements - Overall gross margin improved to 56.9%, up 3.6 percentage points year-on-year, with all business segments showing margin enhancements [35] 4. Increased AI Investment - Sales expenses rose to 9.41 billion yuan, a 2.8% increase year-on-year, primarily due to AI-related promotional activities [38] 5. Earnings Forecast and Rating - The report raises the adjusted net profit forecast for 2025-2027 to 255.5 billion, 285.8 billion, and 318.2 billion yuan, respectively, with corresponding PE ratios of 19, 17, and 16 [40]

Group 1: Core Insights - The report highlights a significant shift in the Chinese stock market, with A-shares showing strong performance, particularly in the technology sector, driven by increased non-bank deposits and a shift in resident investment behavior [1][10][11] - The report notes that non-bank deposits increased by 4.69 trillion yuan year-to-date as of July, marking a new high since 2015, while resident deposits decreased by 1.11 trillion yuan in July, indicating a potential "money migration" towards the stock market [2][17][20] - The report emphasizes that the current market conditions resemble the early stages of a bull market, with small-cap stocks outperforming large-cap stocks and growth sectors leading over cyclical sectors [5][20] Group 2: Industry and Company Recommendations - The report recommends focusing on the copper-clad laminate (CCL) upstream sector, as the demand for high-frequency and high-speed materials is increasing due to AI server and chip requirements, with price increases already observed in the industry [6][23] - The banking sector is also highlighted for its stability amid potential macroeconomic risks, although it may not offer the same growth potential as the technology sector [6][23] - The report suggests that the strong performance of Tencent in Q2 2025, driven by AI integration across its core businesses, positions it as a key player in the technology sector [11][12]

Core Viewpoint - Tencent's Q2 2025 performance shows robust growth across its core business segments, particularly in gaming, advertising, and financial technology, despite rising administrative costs and fluctuations in joint venture earnings [19][20]. Group 1: Financial Performance - Tencent's stock price rose over 600 HKD post-earnings announcement, closing at 590 HKD, with a market capitalization of 5.4 trillion HKD [1]. - Year-to-date, Tencent's stock has increased by 42.72%, outperforming the Hang Seng Index and Hang Seng Tech Index [1]. - Q2 2025 revenue from value-added services reached 913.68 billion RMB, a year-on-year increase of 15.92% [5]. - Financial technology and enterprise services revenue grew by 10.10% year-on-year to 555.36 billion RMB, driven by consumer loan services and commercial payment activities [5]. Group 2: Gaming Segment - Domestic gaming revenue in Q2 2025 grew by 17% year-on-year to 404 billion RMB, supported by new game releases and existing titles [3]. - International gaming revenue surged by 35% year-on-year to 188 billion RMB, driven by Supercell's games and PUBG MOBILE [4]. Group 3: Advertising and Marketing - Marketing services revenue increased by 19.72% year-on-year to 358.62 billion RMB, benefiting from AI-driven advertising platform improvements [6]. - Video account marketing services saw a revenue increase of approximately 50% year-on-year, attributed to higher traffic and transaction activity [6][7]. - WeChat search revenue grew by about 60% year-on-year, enhanced by AI technology improving ad relevance [7]. Group 4: Profitability and Margins - The gross margin for the value-added services segment returned to over 60%, reaching 60.4%, a year-on-year increase of 3.39 percentage points [9][10]. - Overall gross margin for Q2 2025 rose by 3.60 percentage points year-on-year to 56.92% [10]. Group 5: Cost Management - Sales and marketing expenses increased by only 2.77% year-on-year, indicating effective management of marketing expenditures [11]. - Administrative expenses rose by 16.11% year-on-year, primarily due to increased R&D and employee costs related to AI initiatives [11]. Group 6: AI and Future Outlook - Management is exploring monetization avenues for AI, emphasizing its contribution to existing business growth [12]. - Capital expenditures for Q2 2025 were 191.07 billion RMB, a year-on-year increase of 118.89% [14]. - The company is focused on tracking AI's impact on business efficiency and growth across various sectors [17][18].

Core Viewpoint - Tencent Holdings reported strong Q2 2025 results, with revenue of 184.5 billion yuan, a 15% year-on-year increase, driven by robust performance in gaming and advertising sectors [1][2] Group 1: Financial Performance - Q2 2025 operating profit reached 69.25 billion yuan, up 18% year-on-year, while adjusted net profit was 63.05 billion yuan, a 10% increase [1] - Adjusted net profit, excluding contributions from joint ventures, grew 20% year-on-year to 56.8 billion yuan, indicating sustained profitability [1] - Gross margin improved to 57%, up 3.7 percentage points year-on-year and 1.2 percentage points quarter-on-quarter [1] Group 2: Gaming Business - Tencent's gaming revenue in Q2 2025 increased by 16% year-on-year to 91.4 billion yuan, with domestic game revenue rising 17% to 40.4 billion yuan, largely due to the success of the new game "Delta Action" [1] - International gaming revenue surged 35% year-on-year to 18.8 billion yuan, driven by growth from Supercell games and "PUBG MOBILE" [1] Group 3: Advertising Business - Advertising revenue grew 20% year-on-year to 35.8 billion yuan, benefiting from upgraded advertising models and increased AI applications in ad creation and targeting [2] - The gross margin for advertising improved from 56% to 58% year-on-year, reflecting enhanced profitability in this segment [2] Group 4: Enterprise Services - Financial technology and enterprise services revenue rose 10% year-on-year to 55.5 billion yuan, with accelerated growth in AI-related services such as GPU leasing and API token usage [2][3] - High capital expenditures (CAPEX) of 19.11 billion yuan in Q2 2025, a 119% increase year-on-year, indicate ongoing investment in technology and infrastructure [3] Group 5: Future Outlook - The company is expected to achieve revenues of 749.5 billion yuan, 835.4 billion yuan, and 922.8 billion yuan from 2025 to 2027, with adjusted net profits projected at 258.9 billion yuan, 288.1 billion yuan, and 317.7 billion yuan respectively [4] - The integration of AI into the WeChat ecosystem is anticipated to enhance its capabilities, positioning it as a potential "AI operating system" [3][4]