Core Viewpoint - The gaming market in China is witnessing the return of two major titles, Tencent's "Victory Goddess: New Hope" and Bilibili's "Shining! Yujun Girl," both of which have shown unexpected market performance after their respective launches [1][22]. Group 1: Game Performance - "Shining! Yujun Girl" had a long development cycle of five years and was initially launched in Japan in February 2021, generating over 5.1 billion yuan in its first month and approximately 50 billion yuan in total revenue for the year [3][17]. - The game returned to the Chinese market on May 22, 2023, after nearly two years of absence, but its performance has been underwhelming, with only 203 million yuan in revenue over 12 days on iOS [6][12]. - "Victory Goddess: New Hope" generated 24 million yuan in revenue within its first 12 days, which is significantly lower than other major titles like "Dungeon and Fighter: Origin" [32][37]. Group 2: Market Dynamics - Both games faced challenges in their marketing strategies, with "Shining! Yujun Girl" opting for a low-profile re-launch that coincided with the release of "Victory Goddess," impacting its visibility and player engagement [16][37]. - The download trends for "Shining! Yujun Girl" showed a decline, with approximately 66,000 downloads over 12 days, indicating a lack of sustained interest [12][25]. - The competitive landscape in the Chinese mobile gaming market is intensifying, with players becoming more selective and demanding higher quality content, making it increasingly difficult for overseas titles to succeed upon their return [37][38]. Group 3: Future Outlook - The future success of "Shining! Yujun Girl" will depend on the developers' willingness to invest in marketing and content optimization to attract new and returning players [16][37]. - The performance of "Victory Goddess" is being closely monitored, as its initial results are considered average compared to expectations set by its overseas success [32][37]. - The overall trend suggests that the chances of overseas games succeeding in the Chinese market are diminishing, with local developers having a better chance of success with self-developed titles [37][38].

Group 1: Market Overview - The U.S. stock market is experiencing a downturn, particularly in the tech sector, leading to concerns about a potential crash, while the Hong Kong market shows resilience despite recent adjustments [1] - The Hong Kong market's recent performance indicates weakness in short positions, as it has not seen significant declines despite bearish sentiment [1] Group 2: Earnings Reports and Institutional Activity - Tencent and Alibaba reported stable earnings, but their capital expenditures have increased significantly for long-term AI strategies, leading to a misinterpretation of their financial results [2] - Institutional investors, including Bridgewater, have significantly increased their holdings in Chinese assets, with Bridgewater's stake in Alibaba rising by 5.4 million shares, a 21-fold increase, indicating a bullish outlook on Chinese stocks [2] - Major investment firms like Hillhouse and Highfields have also increased their investments in Chinese stocks, reflecting optimism about the Chinese market [5] Group 3: Sector-Specific Insights - Goldman Sachs has adjusted its ratings on Chinese gaming stocks, highlighting a divide in performance between major players like Tencent and NetEase versus smaller firms facing market consolidation [6] - The gaming industry is seeing a shift in consumer demand towards high-quality and casual games, with opportunities for significant revenue generation in differentiated game offerings [6][7] - The overseas market remains a significant opportunity for Chinese game developers, with increasing capabilities in development and innovation [7] Group 4: Index Adjustments - The Hang Seng Index is set to announce its quarterly review, with companies like Pop Mart and BeiGene being potential candidates for inclusion, reflecting their strong performance and low short positions [4] - The index aims to expand its constituent stocks to better represent market dynamics, although the total number of constituents has remained unchanged in recent reviews [4]

Industry Overview - Goldman Sachs updated its views on mid-sized game publishers, highlighting that domestic expansion opportunities have generally narrowed due to market consolidation, with Tencent and NetEase outperforming smaller peers in China [1][2] - The demand for new games has shifted towards high-quality and casual/mini games, putting pressure on traditional games from mid-sized publishers [1][2] - Despite challenges, there are opportunities for single games to achieve annual revenues of RMB 2-3 billion through differentiated gameplay [1] Company Insights - Tencent and NetEase remain Goldman Sachs' top picks in the Chinese internet/gaming sector, while Bilibili is viewed positively due to its advertising strength and profit margin expansion potential [3][7] - Goldman Sachs upgraded Xindong Company to neutral due to longer game lifespans and profit expansion through marketing discipline [3][10] - G-bits was downgraded to sell due to weak performance in traditional games and a lack of new product launches [3][12] - 37 Interactive was downgraded to neutral due to intense competition in mini-games and high customer acquisition costs [3][21] - Perfect World maintains a neutral rating, with key focus on upcoming game releases [3][28] Financial Projections - Bilibili is expected to see a 21% year-over-year revenue growth in 2025, driven by the anniversary of "Three Kingdoms: Strategic Edition" and new game releases [7][8] - Goldman Sachs anticipates a 3% year-over-year revenue decline for G-bits in 2025, with operating profit expected to drop by 17% [12][16] - For 37 Interactive, a 1% revenue decline and a 5% drop in operating profit are projected for 2025 [21][27] - Perfect World is expected to see a 16% year-over-year revenue growth in 2025, with operating profit estimated at RMB 2.17 billion [28][31] Rating Adjustments - Goldman Sachs maintains a buy rating for Bilibili, with a target price of RMB 23.7, reflecting a 35% upside [5][7] - Xindong Company’s rating was upgraded to neutral with a target price of HKD 34, reflecting improved visibility in its game business [10][11] - G-bits was downgraded to sell with a target price of RMB 194, indicating a 19% downside [5][12] - 37 Interactive's rating was downgraded to neutral, with a target price of RMB 16.3, reflecting a 9% upside [5][21] - Perfect World maintains a neutral rating with a target price of RMB 11.8, indicating a 12% downside [5][28]