Core Viewpoint - The company, Xuanji Technology, has received approval for its listing application on the National Equities Exchange and Quotations, marking a significant step in its capital market strategy after years of preparation [1] Group 1: Business Overview - Xuanji Technology has been deeply involved in the animation industry for nearly 20 years, focusing on both animation outsourcing and original animation creation [1][2] - The company’s revenue is projected to be between 260 million to 320 million yuan from 2022 to 2024, with net profit ranging from 37 million to 80 million yuan [2] - The main business segments include digital content creation and licensing, digital content production services, and merchandise sales [2] Group 2: Original IP and Licensing - The company has invested significantly in acquiring original IPs, including a permanent license for the novel "Qin Shi Ming Yue" at a cost of 30.5 million yuan [4] - Xuanji Technology has a diverse portfolio of IPs, including "Qin Shi Ming Yue," "Wu Geng Ji," and others, which are crucial for generating animation and game adaptation licensing revenue [4][5] - The company’s IP licensing revenue has been stable, contributing around 10% to total revenue during the reporting period [7] Group 3: Revenue Breakdown - In 2024, the digital content production service accounted for 88.05% of total revenue, while digital content creation and licensing contributed 9.15% [6] - The company generated over 200 million yuan from major projects like "Douluo Dalu" and "Tian Bao Fu Yao Lu," highlighting the success of its production services [9][11] - Merchandise sales from its original IPs generated between 4 million to 9 million yuan, representing a smaller portion of total revenue [11] Group 4: Client Relationships - The company has established long-term relationships with major clients, including Tencent, Youku, and Bilibili, which account for approximately 90% of total revenue [17] - Tencent is the largest client, contributing between 170 million to 210 million yuan annually, representing 56% to 77% of total revenue [17] - The company has also collaborated with various game developers for IP licensing, with notable clients including NetEase and Shanghai Junmeng [20][21] Group 5: Talent and Operational Structure - The company employs around 768 staff, with a significant portion being production personnel, reflecting the labor-intensive nature of the animation industry [13] - Direct labor costs account for over 70% of operational expenses, with average salaries for production staff exceeding industry averages [14][15] - The company has invested in office and accommodation facilities to attract and retain talent, which is critical for maintaining its competitive edge [13] Group 6: Financial Performance and Future Outlook - The company reported a revenue of 63.37 million yuan in early 2025, a 134% increase year-on-year, with a net profit of approximately 18.69 million yuan [25] - Xuanji Technology holds contracts worth 580 million yuan for ongoing projects, indicating a strong pipeline for future revenue [25] - The company remains optimistic about its future performance, supported by a solid order backlog and ongoing client relationships [25]

Core Insights - The Chinese animation film industry has experienced fluctuating box office performance in recent years, with domestic films achieving breakthroughs in genre diversification and brand operation, successfully activating family viewing demand and enhancing market pricing power [1][8] - From 2022 to 2024, the box office share of domestic animation films has remained in the 60% range, indicating a reliance on blockbuster hits while exposing issues such as insufficient production capacity for mid-tier films and lagging derivative product development [1][10] - In 2024, the total box office for Chinese animation films reached 6.863 billion yuan, with domestic animation accounting for 41.89% of this total [1][10] Animation Film Industry Overview - Animation films are defined as films produced using animation techniques, including theatrical releases and OVA (Original Video Animation) [2] - The industry is characterized by a shift from traditional filmmaking, which relies on real scenes and actors, to digital technology-driven animation that allows for creative freedom and a broader audience reach [2][3] Industry Policy Background - The Chinese government supports the animation film industry through tax incentives, funding support, and awards to encourage content creation that explores traditional culture and modern expression [4] - Policies aim to enhance the industry chain, nurture leading companies, support small teams, and promote cross-media IP development to strengthen international communication [4] Industry Chain Structure - The animation film industry chain includes upstream traditional production hardware and digital technology, midstream content creation and industrial production, and downstream distribution and marketing [6] - The integration of various technical paths, including 2D hand-drawn, 3D digital, and stop-motion animation, is essential for a comprehensive content production system [6] Current Industry Status - The box office share of domestic animation films declined from 2015 to 2017 due to content innovation and industrialization challenges, but saw a rapid recovery from 2018 onwards, with a significant increase in market share [8][10] - The number of domestic films breaking the 100 million yuan mark has fluctuated, with a notable increase in 2019 due to the success of films like "Ne Zha" [10] Competitive Landscape - Leading companies in the animation film industry, such as Light Chaser Animation and Bilibili, leverage technology and IP development to maintain market dominance [12][13] - Emerging players are exploring adult-oriented markets and cross-media development, indicating a competitive landscape focused on enhancing original content and global IP operations [12][14] Future Development Trends - The industry is moving towards deeper integration of technology and industrialization, utilizing AI and virtual production to enhance efficiency and visual expression [14] - Content creation is expected to draw from traditional cultural resources while innovating modern expressions, aiming to resonate emotionally with audiences and adapt to fragmented viewing habits [14]

Core Insights - The 21st China International Animation Festival held in Hangzhou showcased the evolution of the animation industry, transforming from a children's entertainment space to a significant platform for the development of China's animation industry [1][15] - The festival featured over 2,000 animation IPs from 350 animation and gaming companies, highlighting the growing presence of domestic animation in the market [3][7] - The integration of technology and animation was a key theme, with advancements such as virtual filming systems enhancing production efficiency and quality [5][15] Industry Development - The festival has become a major cultural event, attracting a diverse audience and fostering a vibrant animation ecosystem in Hangzhou, which has evolved from a negligible industry 20 years ago to a leading cultural sector [13][15] - The success of domestic animation films like "Ne Zha" has demonstrated the potential of Chinese animation to compete with international counterparts, significantly impacting consumer behavior and economic growth [7][15] - The festival's initiatives, such as the "Animation + Tourism" concept, aim to deepen the engagement of animation with various sectors, creating new cultural consumption scenarios [9][11] Cultural Impact - The festival serves as a platform for promoting traditional Chinese culture through animation, with works like "Qin's Moon" integrating historical narratives and cultural values [3][5] - The event has facilitated the emergence of new consumer experiences, allowing audiences to interact with beloved characters and stories in immersive ways [9][11] - The ongoing development of the animation industry is seen as a vital component of urban competitiveness, particularly in attracting younger demographics [13][15]

Market Growth - The mini-game market, also known as mini-program games, has experienced explosive growth, with a compound annual growth rate of 182.3% from 2022 to 2024, reaching nearly 400 billion yuan in 2024, a year-on-year growth of 99.18% [2][3] - Douyin's mini-game business saw a 130% increase in revenue and a 320% growth in paid user base in 2024 [2] Industry Potential - The mini-game market is expected to become the "second curve" of growth for the gaming industry, alongside the potential for PC games to leverage short video platforms for long-term marketing [3] - Tencent's mini-game platform has reached 1 billion users, with 500 million monthly active users and over 240 games generating over 10 million yuan in quarterly revenue [3] Company Strategies - Companies like Mingchen Health are increasing investments in mini-games, indicating that mini-games will be a key focus for future development [4] - 37 Interactive Entertainment has launched several successful mini-game products, with titles like "Time Explosion" and "Heroes No Flash" performing well in sales rankings [5] - Fuchun Co. plans to continue testing and optimizing mini-game products, aiming for a breakthrough in profitability by early 2025 [5] Monetization Models - The IAAP model, combining in-app advertising and in-app purchases, has emerged as a mainstream monetization strategy for mini-games, challenging previous assumptions about revenue limitations [2][6] - Mini-game developers are focusing on long-term growth strategies, ensuring player experience through thoughtful design and leveraging IP collaborations for sustained engagement [6]