Core Viewpoint - The A-share gaming industry in China is experiencing a structural recovery in Q1 2025 after policy adjustments and market reshuffling in 2024, with a reported revenue of 85.704 billion yuan, a year-on-year increase of 17.99% [1] Industry Overview - The gaming industry has transitioned from extensive growth to a "technology-driven content" phase, with AI and globalization as the two core tracks for future development [2] - The market landscape is increasingly polarized, with only 7 out of 17 listed gaming companies achieving growth in both revenue and profit in Q1 2025 [2] Company Performance - Century Huatong led the industry with a revenue growth of 91.12%, reaching 8.145 billion yuan, marking a historical high [3] - Youzu Network reported a revenue of 359 million yuan, a year-on-year increase of 7.29%, with a net profit of 24.7035 million yuan, up 43.74% [3] - 37 Interactive Entertainment experienced a decline in both revenue and net profit, with Q1 2025 revenue at 4.243 billion yuan, down 10.67%, and net profit at 549 million yuan, down 10.87% [3] - Perfect World saw a significant turnaround with a revenue of 2.023 billion yuan, a year-on-year increase of 52.22%, and returned to profitability [4] - Tencent and NetEase maintained stable revenue growth of 10% or more, showcasing strong market competitiveness [4] Market Dynamics - The outflow of gaming companies to overseas markets has become essential as domestic user growth plateaus, with overseas revenue becoming a core growth engine [5] - Century Huatong's overseas revenue reached 11.367 billion yuan in 2024, accounting for 50.26% of total revenue [6] - Emerging markets such as Southeast Asia and Latin America are becoming new growth points due to increased smartphone penetration and unique cultural preferences [7] Technological Advancements - The integration of generative AI technologies has significantly optimized efficiency across the gaming industry, impacting everything from development to operations [8] - Tencent reported a 24% increase in gaming revenue to 59.5 billion yuan in Q1 2025, supported by AI applications [9] - 37 Interactive Entertainment indicated that over 80% of its 2D art assets and over 30% of its 3D models were generated with AI, enhancing its competitive edge in a rapidly evolving market [10]

Group 1 - The company announced a cash dividend plan for Q1 2025, proposing a distribution of 2.10 yuan per 10 shares, totaling approximately 462 million yuan (before tax) [2] - The mid-year cash dividend plan for 2025 includes a maximum total distribution of 1.5 billion yuan (before tax) across three periods, with each period not exceeding 500 million yuan [2] - In Q1 2025, the company's revenue was 4.243 billion yuan, and net profit attributable to shareholders was 549 million yuan, reflecting year-on-year declines of 10.67% and 10.87% respectively [2] Group 2 - The company has a rich product pipeline in various genres such as MMORPG, SLG, card games, and simulation management, with titles like "Douluo Dalu: Hunting Soul World" and "Zhui Xu" [3] - The product portfolio includes diverse themes ranging from Western fantasy to Eastern mythology, and the company is actively advancing the launch of several mobile games that have received domestic game licenses [3]

Core Insights - The mini-game "Screw Tightening" has gained significant popularity through social media, with users engaging in playful banter about its difficulty, leading to viral growth [2][3] - Major gaming companies like 37 Interactive Entertainment and Giant Network have benefited from the mini-game trend, contributing positively to their financial reports in 2024 [2][5] Industry Trends - The mini-game market has expanded significantly, with both large and small developers exploring new gameplay mechanics, resulting in a diverse range of offerings [2][4] - The rise of mini-games is attributed to their easy accessibility and low development costs, appealing particularly to middle-aged players with limited gaming time but strong spending power [4][5] Company Performance - Giant Network's mini-game "King's Journey" attracted over 25 million new users and generated 600 million yuan in revenue since its launch in February 2024 [5][6] - Century Huachuang's subsidiary, Point Interactive, reported approximately 2.245 billion yuan in revenue from mini-games like "Endless Winter" in 2024 [6] Monetization Strategies - Mini-games primarily monetize through IAA (In-App Advertising), IAP (In-App Purchases), and mixed models, with advertising being a key revenue source due to regulatory constraints on direct charging [6][7] - The potential for overseas expansion is highlighted as a significant opportunity for mini-games, with domestic companies poised to fill gaps in the international market [6][7] Future Outlook - The mini-game sector is expected to continue growing, with established IPs being adapted into mini-games, enhancing user engagement and retention [7][8] - Analysts predict that the convenience and social sharing aspects of mini-games will attract a broader audience, including non-gamers, contributing to market growth [8]

Investment Rating - The investment rating for the company is "Buy" and is maintained [8]. Core Views - The company reported a revenue of 17.44 billion yuan for 2024, representing a year-on-year increase of 5.4%. The net profit attributable to the parent company was 2.67 billion yuan, up 0.5% year-on-year, while the net profit excluding non-recurring items was 2.59 billion yuan, an increase of 3.8% year-on-year [2][5]. - The company plans to distribute dividends with a payout ratio of 82.3%, corresponding to a dividend yield of approximately 6.3% based on the closing price of 4.22 yuan [2][5]. - Several new games, including "Time Explosion" and "Heroes Don't Flash," have shown strong performance in early 2025, with a rich pipeline of upcoming products [2][5]. Summary by Sections Financial Performance - In Q4 2024, the company achieved a revenue of 4.1 billion yuan, which is a decrease of 8.9% year-on-year and a slight decrease of 0.1% quarter-on-quarter. The net profit for the same quarter was 780 million yuan, reflecting a significant year-on-year increase of 66.3% and a quarter-on-quarter increase of 22.6% [2][5]. - The company’s sales expenses in Q4 2024 decreased by 26.4% year-on-year and 14.3% quarter-on-quarter to 2.01 billion yuan, resulting in a sales expense ratio of 49.0% [2][5]. Product Development and Market Position - The company has upgraded its AI capabilities, enhancing various business applications. The self-developed game industry model "Xiao Qi" has significantly improved the quality and efficiency of game production [2][5]. - The company has a diverse pipeline of new games across various genres, including MMORPG, SLG, and card games, which are expected to contribute to revenue growth [2][5]. Future Outlook - The company forecasts net profits of 2.84 billion yuan and 3.09 billion yuan for 2025 and 2026, respectively, with corresponding price-to-earnings ratios of 12.5 and 11.5 times [2][5].