Core Viewpoint - The gaming sector has seen a significant surge this year, with a cumulative increase of nearly 40%, largely driven by the strong performance of leading company ST Huatuo, whose stock price has risen over 163% year-to-date, surpassing the overall gaming sector index growth [1][2]. Group 1: Company Performance - ST Huatuo's market capitalization has exceeded 100 billion yuan, indicating its strong position in the gaming industry [1]. - The company has shown consistent growth, with a projected net profit of 2.4 billion to 3 billion yuan for the first half of the year, representing a year-on-year increase of 107.20% to 159% [2]. - The dynamic price-to-earnings ratio of ST Huatuo stands at 18.67 times, making it one of the most undervalued companies in the gaming sector [2][3]. Group 2: Key Growth Drivers - ST Huatuo holds three key advantages: Didi Interactive, Shengqu Games, and its promising computing power business, which contribute to its ongoing value reassessment [5][10]. - Didi Interactive is recognized as a "global hit maker," with expected revenues of approximately 15 billion yuan in 2024, accounting for nearly 70% of the group's total revenue [6][7]. - Shengqu Games has a rich history of nearly 25 years in game development and operation, having launched numerous successful titles that continue to perform well in the market [8][9]. Group 3: Market Position and Future Outlook - The classic IPs owned by Shengqu Games, such as "Legend" and "Dragon Nest," have a large fan base and significant potential for further development, providing a stable revenue stream for ST Huatuo [9]. - The computing power business is positioned to benefit from the exponential growth in demand for AI and digital economy resources, with ongoing investments in data center projects [10]. - With the combination of high growth from Didi Interactive, a solid domestic foundation from Shengqu Games, and the expansive potential of the computing power business, ST Huatuo's market value may continue to rise, attracting more investors [10].

Group 1: Company Performance and Strategy - The report highlights that Guoquan (锅圈) is expected to achieve a net profit of approximately 180-210 million yuan in H1 2025, representing a year-on-year increase of about 111%-146% compared to 85.5 million yuan in H1 2024 [4] - The core operating profit for Guoquan is projected to be around 180-210 million yuan, up approximately 44%-68% from 125 million yuan in the same period last year, driven by revenue growth and operational efficiency improvements [4] - Guoquan continues to implement its community central kitchen strategy, expanding its instant retail store network and enhancing store operational efficiency through a multi-channel approach [4] Group 2: Market Trends and Competitive Landscape - Jitu Express (极兔速递) has seen a significant increase in business volume, achieving 1.69 billion parcels in Q2 2025, a year-on-year growth of 65.9%, benefiting from the e-commerce demand in Southeast Asia and effective pricing strategies [8][9] - The company is expected to maintain its aggressive pricing strategy to capture more market share, with a projected revenue growth of 16% to 149.94 billion yuan by 2027 [11] - The report indicates that the demand for AI chips in China is anticipated to reach approximately 50 billion USD in the next two to three years, with Nvidia's H20 chip resuming supply in China potentially boosting its market presence [14][18] Group 3: Collaborations and Partnerships - Shengqu Games (盛趣游戏) has entered into a deep cooperation agreement with Tianqiong Interactive to explore the multi-dimensional value of the "Legend" IP, which is expected to enhance the ecosystem of these classic IPs in the mobile and film sectors [22] - The partnership allows Tianqiong Interactive exclusive rights to various derivative products related to the "Legend" and "Legend World" games, while Shengqu Games will focus on developing official products to improve user experience [22] Group 4: Policy and Urban Development Insights - The report discusses the central urban work conference held in July 2025, emphasizing the need for cities to transition from large-scale expansion to improving existing urban quality, aligning with the "People's City" concept [24][25] - It outlines the importance of innovation, livability, environmental sustainability, resilience, and cultural preservation in building "good cities" that meet the aspirations of the people [25][29][30]

Investment Rating - The industry investment rating is "Recommended," indicating a favorable outlook for the industry with expectations that the industry index will outperform the benchmark index [20]. Core Insights - The gaming market in China is showing steady recovery, with a market size of 28.051 billion yuan in May 2025, reflecting a year-on-year growth of 9.86% and a month-on-month increase of 2.56% [4][5]. - The issuance of game licenses has reached new highs, benefiting from policy support that has significantly reduced the average approval cycle and improved the efficiency of small and medium-sized enterprises [6]. - Mobile games are performing particularly well, with a market size of 21.177 billion yuan in May 2025, growing by 11.96% year-on-year, surpassing the overall industry growth rate [8][9]. - The overseas sales revenue of self-developed games reached 1.577 billion USD in May 2025, marking a year-on-year increase of 6.93% and a month-on-month growth of 1.50% [13][17]. Summary by Sections Market Overview - The gaming market in China has shown a steady recovery, with a market size of 28.051 billion yuan in May 2025, which is a 9.86% increase year-on-year and a 2.56% increase month-on-month [4][5]. - The client game market's growth is primarily driven by new and subsequent new releases, with significant contributions from titles like "Victory Goddess: New Hope" and "Three Kingdoms Fantasy Continent 2: Song of the Hero" [5]. Game License Issuance - The issuance of game licenses has shown a stepwise growth trend, with a total of 812 licenses issued from January to June 2025, a year-on-year increase of 21% [6]. - The average monthly issuance increased from 121 licenses in the second half of 2024 to 135 licenses in the first half of 2025, reflecting a 12% year-on-year growth [6]. Mobile Game Performance - The mobile game market size reached 21.177 billion yuan in May 2025, with a year-on-year growth of 11.96%, outpacing the overall industry growth [8]. - Notable new releases include "Brave Land" and "Three Kingdoms Fantasy Continent 2: Song of the Hero," which contributed significantly to the revenue [8]. Overseas Market Growth - The overseas sales revenue of self-developed games reached 1.577 billion USD in May 2025, with a year-on-year increase of 6.93% and a month-on-month increase of 1.50% [13]. - Several titles, such as "Kingshot" and "Tasty Travels: Merge Game," have shown remarkable performance in international markets, contributing to the overall growth [14][17].

Investment Rating - The report does not provide a specific investment rating for the company [2] Core Insights - The report highlights a deep cooperation between Shengqu Games and Tianqiong Interactive, focusing on the multi-dimensional value of the "Legend" IP [6] - Shengqu Games will continue to develop official products for "Legend" and "Legend World," enhancing user experience [6] - The partnership allows Tianqiong Interactive exclusive rights for derivative games, IP protection, and related products in mainland China, marking a new phase for these classic IPs [6] - The company anticipates a significant increase in net profit for the first half of 2025, projected between 2.4 billion to 3 billion yuan, representing a year-on-year growth of 107.20% to 159.00% [5] Recent Performance - The stock of ST Huatuo has shown impressive performance, with a 12-month increase of 295.4%, significantly outperforming the CSI 300 index [4] - As of July 15, 2025, the stock price is 13.01 yuan, with a market capitalization of approximately 96.96 billion yuan [4] Related Reports - A previous report dated August 14, 2023, discusses the establishment of a win-win framework for the "Legend" IP, which is beneficial for the company's long-term development [5]