Summary of Evergreen Games Conference Call Industry Overview - The conference focuses on the evergreen games sector, highlighting the potential for significant revenue growth through effective operations, as demonstrated by Tencent's Supercell game "Clash Royale," which achieved $140 million in revenue in Q2 2025, a 90% quarter-over-quarter increase and over 40% year-over-year growth [2][3] - Companies with evergreen game potential typically possess high Daily Active Users (DAU) and social gameplay attributes, or own classic native IPs that can be continuously iterated and updated, particularly in SLG (Simulation and Strategy Games) and MMO (Massively Multiplayer Online) genres, which have high player sunk costs and stronger user retention [2][5] Key Insights and Arguments - Evergreen game companies generally have valuations above the industry average, with companies like Nintendo, Take-Two, and Nexon showing strong forward Price-to-Earnings (PE) ratios, indicating high market expectations for future earnings [2][6] - As of early 2025, Nintendo's forward PE was 36, TikTok's was 27, and Nexon's was 26, averaging 26, which is higher than the average valuation of the A-share and Hong Kong game sectors, which is below 20 [7] - The operational methodology for evergreen games includes simple content updates, seasonal updates, and continuous iteration of core gameplay and monetization strategies, creating a platform that encourages ongoing player engagement and spending [9][10] Company-Specific Strategies - Tencent's strategy for 2025 emphasizes the operation of headlining games while adjusting its organizational structure to enhance producer incentives, focusing on long-term development and middle-tier games like "Crossfire" and "League of Legends" [4][11] - Nintendo aims to maintain user engagement by expanding gameplay on its platforms, creating "infinite" products that encourage continuous player interaction and consumption [12][13] - Tencent's overseas game revenue accounts for approximately 30%, with Supercell, Riot Games, and Miniclip being significant contributors [14] Potential Companies for Evergreen Games - Companies with successful evergreen game potential typically have large DAU advantages and social gameplay attributes, such as Tencent and Giant Network's new title "Supernatural Action Team" [5] - Companies with classic native IPs that can be continuously updated, like Nintendo with its Mario and Pokémon franchises, and Nexon with its Dungeon Fighter Online (DNF) IP, also show strong potential [5][29] - SLG and MMO games are identified as having longer lifecycle potential due to their inherent player engagement characteristics [30] Valuation Insights - Evergreen game companies are generally valued significantly higher than the industry average, with stable and continuous revenue growth being a key factor supporting these high valuations [6] - The report highlights the importance of maintaining a balance between hardware and software revenue, with Nintendo's software revenue becoming a more significant contributor as hardware sales plateaued [18][19] Conclusion - The evergreen games sector is characterized by companies that can maintain player engagement through continuous updates and strong IPs, leading to sustained revenue growth and higher valuations compared to the broader gaming industry. The strategies employed by leading companies like Tencent and Nintendo serve as benchmarks for success in this evolving market.

Core Insights - The article discusses how mobile game developers are increasingly directing players to external payment options to avoid Apple's 30% commission, referred to as the "Apple tax" [1][3][12] - A study by Liquid & Grit analyzed over 30 cases of leading mobile game companies like Supercell and Niantic, focusing on their strategies to sell in-app purchases (IAP) directly to players outside of the App Store [1][3] Group 1: Strategies for Redirecting Players - Liquid & Grit categorized the new store designs into four main types: offering web store discounts in the native IAP store, pop-ups, buttons on the main game interface, and using in-game news and email systems for guidance [1][3] - "Social Casino" games are the most proactive in redirecting players to web stores, utilizing all four methods, while other game categories show varied adoption [3][5] - Specific games like "Dragon City" and "PUBG Mobile" employ different strategies, such as banners and pop-ups, to encourage players to use web stores for purchases [5][7] Group 2: Incentives and Challenges - To enhance conversion rates, developers must reduce payment friction and increase player motivation to choose external payment options over Apple’s [11][12] - Companies like Epic Games offer incentives, such as a 20% cash back, to encourage players to opt for web payments [11] - The report suggests that the most effective design so far is the "purchase pop-up," which allows players to complete transactions without leaving the game, thus maintaining a seamless experience [11][12] Group 3: Alternative Payment Solutions - Companies with in-house resources are encouraged to build their own web stores and utilize payment processors like Stripe or Adyen to handle transactions [12] - For developers who prefer not to create their own stores, managed web store service providers like Xsolla and Stash are available, offering a quicker setup at a cost lower than Apple's commission [12]

Group 1: MOMO US - The operating profit exceeded expectations, with overseas new products maintaining strong growth momentum [1] - Revenue for Q2 2025 was 2.62 billion yuan, a year-on-year decrease of 3%, while adjusted operating profit was 450 million yuan, surpassing the expected 390 million yuan due to better-than-expected cost control and marketing channel optimization [1] - Overseas revenue continued to expand, increasing by 73% year-on-year, accounting for 17% of total revenue [1] Group 2: Future Outlook for MOMO US - Revenue for Q3 2025 is expected to decline by 2% year-on-year, with the impact of stricter compliance on streamer taxes leading to potential increases in revenue-sharing incentives [2] - Overseas revenue is projected to grow by 62% year-on-year, with products like Amar and Yaahlan expected to maintain strong growth [2] - Adjustments to net profit expectations for 2025/26 have been made due to potential new product marketing investments and changes in dividend withholding tax rates [2] Group 3: SF Express (9699 HK) - The company is experiencing continuous profit release under diversified layouts, with a buy rating maintained [3] - Revenue growth for 2025-27 has been revised upward by 14%/12%/12% to 22 billion - 30.4 billion yuan, with year-on-year growth rates of 40%/20%/15% [3] - Profit forecasts for 2025-27 have been increased by 26%/23%/27% to 340 million - 760 million yuan, with Non-IFRS net profit margins of 1.5%/2%/2.6% [3] Group 4: Future Outlook for SF Express - SF Express is expected to benefit from a rational return of subsidies in the takeaway market, with significant business space remaining [4] - The target price has been adjusted to 15.4 HKD based on a rolling valuation to 2026, corresponding to 0.5 times the sales ratio [4] Group 5: Consumer Industry Overview - The consumer market in mainland China showed moderate recovery in the first half of 2025, with structural differentiation in performance across segments [8] - Key trends include the leading performance of experiential consumption, revenue growth from global expansion strategies, and operational efficiency becoming a critical factor for profit differentiation [8][9] - Recommendations include focusing on players capturing consumer trends with high growth potential, such as Pop Mart (9992 HK), and industry leaders with stable fundamentals like Midea (000333 CH), Anta (2020 HK), and Yili (600887 CH) [8] Group 6: Automotive Industry Overview - The penetration rate of new energy vehicles reached 55.2% in August, with retail sales of passenger cars hitting a historical high of 1.995 million units [12] - The export of passenger cars, including new energy vehicles, maintained good growth momentum, with 204,000 new energy vehicles exported in August, accounting for 40.9% of total exports [13] - The upcoming launch of multiple new models in Q3-Q4 2025 is expected to enrich market supply and boost sales during the traditional peak season [13][14]

Group 1 - The core viewpoint of the reports indicates that Tencent Holdings is expected to maintain a stable growth in gaming revenue, with a projected annual growth rate of 16%, despite a decline in revenue from older games [1] - Tencent's domestic gaming revenue saw a year-on-year decrease of 2.2 billion yuan (10%), primarily due to the high base effect from "MDnF," although this was partially offset by new game launches [1] - Tencent's overseas gaming revenue increased by 470 million yuan (9%) year-on-year, driven by new game contributions that mitigated the high base effect from "Brawl Stars" [1] Group 2 - NetEase's mobile game revenue maintained a year-on-year increase of 200 million yuan (3%), with new games and "Party Animals" contributing to offset the high base effect from "Nirvana in Fire" [2] - "Party Animals" performed well, maintaining over 1 billion yuan in monthly revenue in August, boosted by a new anniversary version and summer operations [2] - New game highlights include Tencent's "Valorant: Source Action," which reached a peak of 4th on the domestic iOS game sales chart, with estimated first-month revenue of 500-700 million yuan [2]

Group 1 - Tencent's gaming revenue is expected to grow by 16% for the year, despite a decline in domestic game revenue due to high base effects from previous titles [1] - New game launches are expected to offset the decline in older game revenues, with a strong pipeline of upcoming titles [1] - Tencent's overseas revenue increased by 4.7 billion yuan, driven by games like "Clash Royale," which saw significant growth in both year-on-year and month-on-month comparisons [1] Group 2 - NetEase's mobile game revenue maintained a year-on-year increase of 2 billion yuan, supported by new titles and the performance of "Egg Party" [2] - The overseas revenue for NetEase grew by 0.5 billion yuan, benefiting from new game releases [2] - Upcoming new games include Tencent's "Valorant: Source Action," which is projected to generate 5-7 billion yuan in its first month, and NetEase's "Destiny: Stars," expected to exceed 1 billion yuan in its first month [2]

Core Viewpoint - Goldman Sachs maintains a buy rating for Tencent, highlighting the company's significant cost advantages in AI infrastructure and projecting revenue and earnings growth through 2025 [2][3]. Group 1: AI Infrastructure and Cost Efficiency - Tencent demonstrates significant cost advantages in AI infrastructure by utilizing dynamic model routing to lower inference costs, transitioning from deep inference models to Turbo and refined models [5]. - The majority of queries in Tencent's search business are now processed through the Turbo model, which can also operate on the more cost-effective refined model [5]. - Management expresses confidence in chip supply, stating that internal demand for computing power is sufficient and that the company can utilize domestic chips for inference [6][7]. Group 2: Mixed-Mode Model Development - Tencent's self-developed mixed-mode 3D model ranks highly on the Hugging Face platform, focusing on training from text-based models to multi-modal and physical world applications [9]. - AI technology has improved efficiency in key areas, such as increasing click-through rates in advertising and accelerating content generation in game development [10]. Group 3: Integration of AI into WeChat Ecosystem - The company plans to cautiously integrate AI into the WeChat ecosystem, prioritizing user experience and security, reflecting Tencent's commitment to the stability of its super app ecosystem [11]. Group 4: AI-Driven Content Production in Gaming - AI has significantly enhanced content production efficiency in game development, with automated code generation speeding up prototype development while still requiring manual debugging [12]. - The domestic gaming market has a substantial user base, with potential to convert mini-game users into application game users [12]. - Tencent aims to leverage its strong PC platform fan base and dedicated mobile esports events to extend the lifecycle of games like "Valorant" [12]. Group 5: Advertising Growth through AI Upgrades - Tencent has upgraded its advertising base model to improve conversion rates, focusing on content consumption and commercial behavior analysis [16]. - AI-driven advertising technology upgrades are expected to enhance click-through rates across Tencent's ad inventory, offsetting depreciation impacts related to AI [17]. - The company anticipates that AI will create monetizable intent recommendation and agent prompt features in the long term [18]. Group 6: Cloud Business and Revenue Growth - Tencent is shifting towards value-added software and inference efficiency in its cloud business, with healthy profit margins in the domestic market [19]. - The unique WeChat ecosystem and global gaming assets, combined with multiple monetization levers, position Tencent for compound revenue growth amid macroeconomic cycles [20].

Investment Rating - The report maintains a "Buy" rating for Tencent Holdings with a target price not specified [7]. Core Insights - Tencent's overall performance in Q2 2025 shows strong revenue and profit growth, with AI capabilities contributing significantly [1]. - Revenue increased by 15% year-on-year, while gross profit rose by 22%. Non-IFRS operating profit grew by 18%, and Non-IFRS net profit increased by 10%, all exceeding Bloomberg consensus expectations [1]. - The company emphasizes the substantial contributions of AI to advertising effectiveness and long-standing games, with various AI features launched within WeChat [2]. - The gaming segment saw a 22% increase in revenue, driven by both domestic and international markets, with notable titles contributing to this growth [3]. - Marketing services revenue grew by 20%, with significant increases in video account and search advertising, supported by AI enhancements [4]. - Financial technology and enterprise services also showed a 10% growth in revenue, with improved gross margins [5]. Summary by Sections Overall Performance - Q2 2025 revenue and profit growth were strong, with revenue exceeding Bloomberg expectations primarily from gaming and advertising [1]. AI Contributions - AI applications have been integrated into various services, enhancing advertising performance and user engagement [2]. Gaming Revenue - Network gaming revenue increased by 22%, with both domestic and international markets performing well [3]. Marketing Services - Marketing services revenue exceeded expectations, driven by AI improvements in advertising effectiveness [4]. Financial Technology and Enterprise Services - Financial technology and enterprise services revenue grew by 10%, with enhanced profitability [5].

Investment Rating - The investment rating for the company is "Buy" (maintained) [1] Core Views - The report highlights that the company's Q2 revenue reached 184.5 billion yuan, representing a year-over-year increase of 14.5% and a quarter-over-quarter increase of 2.5%, exceeding consensus expectations of 178.9 billion yuan [4] - The gross profit for Q2 was 105.0 billion yuan, up 22.3% year-over-year and 4.5% quarter-over-quarter, also surpassing the consensus estimate of 98.8 billion yuan [4] - Adjusted net profit for Q2 was 63.1 billion yuan, reflecting a year-over-year increase of 10.0% and a quarter-over-quarter increase of 2.8%, beating the consensus estimate of 62.0 billion yuan [4] - The report emphasizes the company's ongoing investment in AI, which is driving growth across various business segments, including gaming, marketing, and financial technology [10] Summary by Sections Q2 Performance - Q2 revenue was 184.5 billion yuan, beating expectations by 3.1% [4] - Gross profit was 105.0 billion yuan, exceeding expectations by 6.3% [4] - Adjusted net profit was 63.1 billion yuan, beating expectations by 1.7% [4] Value-Added Services - Domestic gaming revenue was 40.4 billion yuan, up 17% year-over-year, while international gaming revenue reached 18.8 billion yuan, up 35% year-over-year [5] - The company is enhancing AI applications in gaming, leading to a 20% year-over-year increase in mini-game revenue [5] Marketing Business - Marketing revenue was 35.8 billion yuan, up 20% year-over-year, driven by AI improvements in advertising platforms [6] - The combined MAU for WeChat and QQ reached 1.411 billion and 532 million, respectively [6] Financial Technology - Financial technology revenue was 55.5 billion yuan, up 10% year-over-year, exceeding expectations [7] - Growth in enterprise services was driven by increased demand for AI-related services [7] AI Ecosystem - Capital expenditure for Q2 was 19.1 billion yuan, up 119% year-over-year, reflecting the company's commitment to enhancing its AI capabilities [8] - The report details advancements in AI models and tools, including the launch of new 3D models and upgrades to Tencent Cloud's AI programming tools [9] Investment Recommendations - The company is expected to achieve net profits of 252.3 billion yuan, 286.1 billion yuan, and 324.6 billion yuan for 2025, 2026, and 2027, respectively [10] - The report maintains a "Buy" rating based on the company's strong performance in gaming and the positive impact of AI on advertising and cloud services [10]

Investment Rating - The report maintains a "Buy" rating for Tencent Holdings with a target price of 673.68 HKD [5][3] Core Views - The report highlights that AI-driven growth in advertising and gaming is expected to continue, with significant contributions from long-standing games and the upcoming launch of "Valorant" [9][3] - The forecast for IFRS net profit for 2025-2027 is adjusted to 223.1 billion, 257.7 billion, and 297 billion RMB respectively, reflecting an upward revision based on improved expectations for gaming, advertising, and payment services [3][9] Financial Performance Summary - For 2023A, the operating revenue is projected at 609,015 million RMB, with a year-on-year growth of 9.82% [4] - The operating profit for 2023A is expected to be 152,784 million RMB, showing a significant year-on-year increase of 52.76% [4] - The net profit attributable to shareholders for 2023A is forecasted at 115,216 million RMB, with a year-on-year decline of 38.79% [4] - The report anticipates a recovery in net profit growth, with projections of 68.44% growth in 2024A and steady growth rates of around 15% for the following years [4][3] Revenue Breakdown - The report indicates that the revenue from value-added services reached 914 billion RMB in Q2 2025, with a year-on-year increase of 16% [9] - Gaming revenue for Q2 2025 is expected to be 592 billion RMB, reflecting a year-on-year growth of 22% [9] - Marketing services revenue is projected at 358 billion RMB for Q2 2025, with a year-on-year increase of 20% [9] Valuation Metrics - The report provides a sum-of-the-parts (SOTP) valuation, indicating a target price of 673.68 HKD, which reflects a price-to-earnings (P/E) ratio of 22 for 2025E [3][11] - The report also notes a projected P/B ratio of 5 for 2025E [4][11] Market Performance - The stock has shown a strong performance with a 60.41% increase over the past 12 months [6] - The report notes that the stock price as of August 19, 2025, was 592.5 HKD, with a 52-week high of 600 HKD and a low of 361.64 HKD [5]

Core Insights - The change in Apple's payment rules is a significant transformation for the global mobile gaming industry in 2025, allowing game companies to bypass the 30% "Apple tax" and choose third-party payment service providers, thereby significantly reducing channel costs [1] - The new EU regulations, effective next year, will also allow developers to select third-party payment options, further lowering app store service fees [1] - Direct-to-Consumer (DTC) strategies are emerging as a major trend for increasing revenue in overseas markets in 2025 [1] Group 1: DTC Revenue Insights - Playtika reported that 25.3% of its Q2 2025 revenue came from its web store, amounting to $176 million, with a year-on-year growth of 1.3% but a quarter-on-quarter decline of 1.8% [1] - FunPlus has accelerated its DTC plans in response to regulatory changes, having established its DTC strategy following Apple's IDFA rule changes [3] - Modern Times Group indicated that DTC revenue from web games accounted for 24% of its Q2 revenue, up from 19% year-on-year [3] - SciPlay noted that approximately 18% of its Q2 2025 sales, equating to $35 million, came from its DTC store [5] - Huuuge Games reported that DTC contributed 20% to its Q1 total revenue, increasing to 21.5% in April [5] - Stillfront Group stated that DTC now represents 39% of its net revenue, up from 34% in Q2 2024 [6] - Ten Square Games reported that its web store accounted for over 19% of total revenue in March, with its fishing simulation game "Fishing Clash" generating over 26% of its revenue from its own store [6] Group 2: DTC Challenges and Strategies - DTC is not merely about establishing a web store; it requires a sophisticated system that includes localized payment options and optimized purchase funnels [9][16] - Payment preferences vary by region, with credit cards being the default globally, but alternatives like iDEAL in the Netherlands (68%) and PayPal in Germany (64%) dominating in specific markets [9][10] - Most players do not make a purchase on their first visit; 80% of first-time visitors return within 30 days, with a median conversion time of 2.6 days [11] - 50% of first-time buyers make a second purchase, with half of them returning within 7 days [11] - To enhance DTC profitability, publishers must leverage smart discounts, personalized recommendations, and repurchase incentives [15] Group 3: DTC Optimization Strategies - Key factors for improving off-platform payment conversion rates include providing a seamless user experience and fostering new payment habits [17] - Establishing persistent and easily accessible entry points for players is crucial, utilizing in-game prompts to educate them about new purchasing options [17] - Keeping players within the game during the purchase process can significantly improve conversion rates, as leaving the game can lead to a 45% drop in conversion [18] - Offering substantial incentives for web store purchases is essential, as players are more familiar with native in-app purchases [21] - Testing both native in-app purchases and web payments can provide insights into user behavior and conversion rates [25][27]