Summary of G-bits Conference Call Company Overview - **Company**: G-bits - **Industry**: Mobile and PC Gaming Key Points and Arguments Financial Performance - **Mobile Game Performance**: - "Ask the Dao Mobile Game" experienced a slight year-on-year decline but remained stable quarter-on-quarter. No significant growth was observed in November 2024 due to lack of special services [2][6] - "Friends Digging Treasure" had an average monthly revenue of less than 100 million RMB in Q3 and Q4, showing no significant changes [2][6] - "Ask the Dao PC Game" saw a moderate year-on-year decline from October to November, potentially due to version updates and post-pandemic user shifts [2][6] New Game Releases - **"Sword Legend"**: - Domestic version saw a slight decline in Q3 but did not meet expected stability; overseas versions in Hong Kong, Macau, and Japan showed similar trends [2][6] - Expected revenue for Q4 2025 is between 150 to 200 million RMB, with total revenue projected around 300 million RMB including overseas markets [2][9] - **New Game User Retention**: - A new game showed a slight decline in user retention, prompting design and gameplay adjustments, with a new version planned for January 2026 [2][8] - Compared to "One Thought of Immortality," the new game performed poorly, with September and October activities failing to significantly boost revenue [2][8] Revenue Structure and Marketing Strategy - **Revenue Changes**: - Significant changes in revenue structure were noted for "Friends Digging Treasure" since its launch, with high revenue sharing percentages from platforms like Tencent and Apple [3][4] - G-bits focuses on iOS for new game promotions, utilizing KOLs and KOCs for community marketing, with controlled costs and no reliance on high-profile celebrity endorsements [3][13][14] User Engagement and Retention - **User Feedback**: - "Longing for the Wild" received positive feedback from core users, but broader user performance remains uncertain [3][17] - The company aims to balance long-term operations and profitability while assessing the impact of new games on existing IPs [3][7] Operational Adjustments - **Team Structure**: - The company has seen a reduction in employee numbers from approximately 1,400 to around 1,100 due to project terminations, retaining core talent for new projects [22][23] - The issuance team remains stable, with a focus on competitive internal structures to enhance project outcomes [15][27] Future Outlook - **Financial Projections**: - New products are expected to have limited short-term profit contributions due to initial investment phases, with a gradual increase in revenue anticipated [12][19] - The company plans to conduct regular evaluations of project performance, leading to frequent but minor adjustments in strategy [24] Market Positioning - **Competitive Landscape**: - The Japanese market shows good potential for user lifecycle payments, but initial payments are low, with no immediate improvements [10] - The company is cautious about expanding into other regions until existing markets are stabilized [10] Conclusion - G-bits is navigating a challenging gaming landscape with mixed performance across its titles, focusing on strategic adjustments in marketing, user engagement, and operational efficiency to enhance profitability and market presence [2][3][4][5][6][7][8][9][10][11][12][13][14][15][16][17][18][19][20][21][22][23][24][25][26][27][28][29][30][31]

Core Insights - The company's products such as "Zhang Jian Chuan Shuo" and "Dao You Lai Wa Bao" have shown strong performance and sustainability, expected to continue contributing to revenue in 2026 [1] - The company maintains an "Overweight" rating due to the promising performance of new products and an upward revision of EPS forecasts for 2025-2027 [2] Financial Performance - For the first three quarters of 2025, the company's net profit attributable to shareholders reached 1.214 billion yuan, a year-on-year increase of 84.66%, with a single-quarter net profit of 569 million yuan, up 307.7% [2] - Total revenue for the first three quarters was 4.486 billion yuan, reflecting a year-on-year growth of 59.17%, with a single-quarter revenue of 1.968 billion yuan, up 129.19% [2] - The company announced a cash dividend of 6 yuan per share, with total dividends amounting to 904 million yuan for the first three quarters of 2025 [2] Product Performance - "Zhang Jian Chuan Shuo" generated a total revenue of 1.166 billion yuan in the mainland for the first three quarters, maintaining a position in the top 40 of the iOS game sales chart [3] - "Dao You Lai Wa Bao," launched in May, has generated 316 million yuan in revenue by the end of September, contributing positively to the company's performance [3] - The company's overseas revenue for the first nine months reached 588 million yuan, a year-on-year increase of 59.46%, with "Zhang Jian Chuan Shuo (Overseas Version)" contributing 478 million yuan since its launch [3] Future Outlook - Upcoming product launches such as "Wen Jian Chang Sheng" and the overseas release of "Zhang Jian Chuan Shuo" are anticipated to further drive growth [3] - The company is preparing to launch the SLG mobile game "Jiu Mu Zhi Ye," which is expected to contribute to 2026 performance, with offline trials already commenced [3]

Core Insights - The overall performance of A-share listed gaming companies showed robust growth in Q3 2025, driven by a recovering external economic environment and increased user activity during the summer season [1][2][6]. Group 1: Company Performance - Century Huatong achieved a market capitalization exceeding 100 billion yuan, with its stock price soaring over 300% this year, peaking at 150 billion yuan [2][6]. - Century Huatong reported Q3 revenue of 10.016 billion yuan, a year-on-year increase of 60.19%, and a net profit of 1.701 billion yuan, up 163.78% [4][5]. - Giant Network's Q3 revenue reached 1.706 billion yuan, a significant increase of 115.63%, with a net profit of 639 million yuan, up 81.19% [7][8]. - Perfect World reported Q3 revenue of 1.726 billion yuan, a 31.45% increase, and a net profit of 162 million yuan, up 176.59% [15][14]. - JiBit's Q3 revenue was 1.968 billion yuan, a remarkable growth of 129.19%, with a net profit of 569 million yuan, up 307.70% [12][13]. - Yozu Network's Q3 revenue reached 331 million yuan, an increase of 11.99%, with a net profit of 26 million yuan, up 4466.74% [19][20]. Group 2: Market Trends - The top six A-share listed gaming companies (Century Huatong, Giant Network, Kaiying Network, 37 Interactive, JiBit, Perfect World) all reported net profit growth in Q3 [2][6]. - The gaming industry is experiencing a bifurcation, with some companies like Tom Cat facing significant declines, while others like Yozu Network and Century Huatong thrive [16][25]. - The competitive landscape is intensifying, with companies like Shenzhou Taiyue and 37 Interactive actively expanding their product lines and exploring new markets [17][32]. Group 3: Future Outlook - Century Huatong is focusing on classic IP adaptations and new game launches, with several projects in development aimed at enhancing its market position [28][30]. - Giant Network is diversifying its portfolio with new game types, including strategy card games and SLG titles, to capture a broader audience [30][32]. - The industry anticipates further innovations and product launches in the final quarter of 2025, with companies preparing to unveil new titles and expand their market reach [36][37].

Group 1 - The A-share market opened positively on September 22, with the Shanghai Composite Index rising by 0.05%, the Shenzhen Component Index by 0.37%, and the ChiNext Index by 0.10% [1] - The gaming sector experienced fluctuations, with the gaming ETF (159869) dropping over 1% after a low opening, but it has seen a net inflow of 507 million yuan over the past five trading days, indicating strong investor interest [1] - According to CITIC Securities, the gaming industry is expected to rejuvenate in 2025 after a period of self-reflection and external changes from 2021 to 2024, with a 19% year-on-year growth in the domestic self-developed online gaming market in the first half of this year [1] Group 2 - The current gaming industry boom is driven by strong supply and demand, leading to increased gaming hours and market expansion, with a noticeable easing of competition among leading companies [2] - Changes in marketing strategies and channel transformations have reduced pressure on sales expenses and channel sharing, benefiting gaming communities and live streaming platforms [2] - The integration of AI into game development is enhancing productivity, reflected in the decrease of overall R&D expense ratios from 48% in Q1 2023 to 29% in Q2 2025, indicating a clear upward trend in profit margins for the sector [2]

Summary of Industry and Company Insights from Conference Call Records Industry Overview - **Cultural Policy Changes**: Recent relaxation of broadcasting policies, including the removal of restrictions on the number of TV series, episode duration, and historical drama limits, aims to increase content supply and enhance advertising capabilities in the broadcasting industry [2][3][4] - **Investment Opportunities**: The media industry, being a light-asset sector, is highly sensitive to policy changes. The combination of supportive cultural policies, active capital markets, and technological advancements is driving investment in the media sector [5] Gaming Industry Insights - **Performance Metrics**: The gaming sector has shown strong performance in early 2025, with 14 A-share gaming companies reporting total revenues of 22.18 billion yuan, reflecting year-on-year and quarter-on-quarter growth. The gross profit margin reached 71.3%, indicating robust earnings realization [6][10] - **R&D and Product Development**: R&D expenses for gaming companies have remained stable at around 2 billion yuan, with a notable increase in self-developed hit products, which reduces channel sharing costs and improves gross margins [7][8] - **Profitability Trends**: The gaming industry's net profit margin approached 20%, the highest in five years, with expectations for further growth in the latter half of 2025 driven by new product launches [10][11] - **Valuation Outlook**: The gaming sector's TTM valuation is approximately 33 times, with leading companies valued at under 30 times, suggesting no signs of valuation bubbles. Future estimates indicate a potential return to a 15-20 times valuation range by 2026 [12][13] IP Industry Insights - **Market Potential**: The Chinese IP industry is projected to reach a market size of over 100 billion yuan, with a compound annual growth rate (CAGR) of approximately 8.5% from 2020 to 2024. The retail sales related to IP licensing are expected to exceed 155 billion yuan by 2024 [15] - **Sales Dynamics**: Currently, 90% of revenue in China comes from box office sales, with only 10% from IP derivative sales, indicating significant room for growth in the development and sales of IP derivatives compared to Japan and the U.S. [16] - **Driving Factors**: Key factors driving the growth of the Chinese IP industry include consumption upgrades, demographic shifts, and the maturation of supply chains and sales channels [17] Notable Companies in the IP Sector - **Leading Companies**: Companies such as Pop Mart, Damai Entertainment, and Star Legend are recognized for their strong operational capabilities and resource matrices in the Chinese IP market, making them significant investment targets [19] Additional Insights - **AI Integration**: The combination of IP and AI is enhancing product appeal, as seen in successful launches like AI Ultraman, indicating a positive market reception for AI products backed by well-known IPs [18]

Summary of G-bits Conference Call Company Overview - G-bits is a gaming company that has recently launched new games, including "Wen Jie Chang Sheng" and "Zhang Jian Chuan Shuo," which have shown strong performance in both domestic and overseas markets [2][4]. Key Points and Arguments - **Strong Financial Performance**: G-bits reported exceptional financial results, exceeding expectations for three consecutive quarters. In Q2, the company confirmed a stable performance from existing products while new releases "Wen Jie Chang Sheng" and "Zhang Jian Chuan Shuo" achieved impressive results, with "Zhang Jian Chuan Shuo" generating 420 million in its first month and over 100 million in overseas markets [3][4]. - **Market Appeal of New Products**: Both "Wen Jie Chang Sheng" and "Zhang Jian Chuan Shuo" have performed well in the market. "Zhang Jian Chuan Shuo" achieved 420 million in domestic revenue and at least 100 million in overseas revenue in its first month, contributing significantly to G-bits' overall performance [2][4]. - **Future Growth Drivers**: Future growth for G-bits is expected to come from the continued strong performance of self-developed new products, enhanced overseas distribution capabilities, and the potential contribution from the agency product "Jiu Mu Zhi Ye." The agency product has received approval and is currently in testing [5]. - **Impact of Diverse User Base**: The success of G-bits' products, particularly "Zhang Jian Chuan Shuo," has been significantly influenced by a diverse user base, especially women under 30. This demographic has optimized the user acquisition model, leading to increased game revenue and profit margins [6]. - **Effectiveness of Overseas Strategy**: G-bits' overseas strategy, which had previously shown limited results, is now yielding positive outcomes. The company has strong products and over five years of overseas distribution experience, as evidenced by the success of "Zhang Jian Chuan Shuo" in regions like Hong Kong, Macau, and Japan [7]. - **Changes in Thunder Game's Strategy**: Thunder Game has shifted its focus and optimized its resources, concentrating its efforts on the SLG (Simulation Game) sector. This strategic adjustment is expected to lead to significant breakthroughs and provide new revenue growth opportunities for G-bits [8]. Additional Important Content - G-bits' performance in the second quarter has provided a stable foundation for the company's overall financial health, indicating a positive outlook for future quarters [2][3]. - The company's ability to adapt its marketing strategies to target specific user demographics has proven effective in enhancing revenue streams [6]. - The potential of the agency product "Jiu Mu Zhi Ye" could further diversify G-bits' offerings and contribute to its growth trajectory [5].

Summary of the Gaming Industry Conference Call Industry Overview - The gaming industry is experiencing a steady upward trend and stable performance, making it a worthwhile sector for investment in the current market environment, particularly due to the product cycle in 2023 and 2024 [1][3] Key Companies and Their Performance 1. Giant Network - The game "Supernatural Action Group" has a high Daily Active Users (DAU) count and utilizes content dissemination strategies to effectively reduce sales expenses, leading to profit release. Significant revenue contribution is expected in Q3 due to frequent version updates that extend the game's lifecycle [1][5] - In July, the game reached over one million concurrent users, with continuous updates planned for September, enhancing user engagement and revenue potential [5] 2. G-bits - G-bits launched three new games this year: "Wen Jian Chang Sheng," "Zhang Jian Chuan Shuo," and the mini-program game "Dao You Lai Wa Bao." These are expected to contribute positively to profits in Q3, with "Zhang Jian Chuan Shuo" also having an overseas version that will generate additional revenue [1][6] - "Wen Jian Chang Sheng" generated 363 million yuan in Q1 but saw a decline to 203 million yuan in Q2. "Zhang Jian Chuan Shuo" contributed 426 million yuan in Q2, with expectations for improved performance in Q3 [6] 3. Kaiying Network - Kaiying Network holds exclusive rights to the "Legend" franchise, allowing it to sign cooperation agreements with major publishers, generating stable annual revenues of 100 to 200 million yuan [1][7] - The "Legend Box" business is expected to generate 543 million yuan in revenue in the second half of 2024, with projections of 1 billion yuan in total revenue for 2025, reflecting a year-on-year growth rate of 40% to 70% [1][8] - The high gross margin of 92% to 93% for the "Legend Box" business significantly enhances the company's overall revenue and profit [8] Market Outlook - The performance of the gaming industry is expected to remain stable in 2025 and 2026, supported by a substantial product cycle. The gaming sector and its ETFs are projected to continue their steady growth despite volatility in other sectors [3][4] Recommendations - Investors are advised to focus on Giant Network, G-bits, and Kaiying Network due to their strong performance and growth potential in the current market environment [2][4][9]

Summary of the Conference Call on the Gaming Sector Industry Overview - The gaming sector in A-shares has shown strong performance in August 2025, continuing a positive trend since the beginning of the month, significantly outperforming other sectors in September [2][3][5]. Key Companies and Products - **ST Huatuo**: - "Wild Survival" achieved over $200 million in global revenue in August, a 17% month-over-month increase, with overseas iOS and Google Play contributing over $150 million, up 21% [1][2]. - "King Shot" generated $77.6 million in August, a 26% increase [2]. - "Tasty Travels" maintained a steep growth trajectory, reaching nearly $10 million in August, with a 24% month-over-month increase [2]. - **Giant Network**: - "Supernatural" has shown outstanding performance since the first half of 2025, with domestic iOS revenue in August increasing by 73% [4]. - **G-bits**: - "Sword of the Hero" performed well in overseas markets, with a 62% month-over-month increase in Hong Kong, Macau, and Taiwan, and a 116% year-over-year increase in Japan [4]. - **Xindong Company**: - The performance was driven by older games, with "Xindong Town" reaching a new high in July due to anniversary celebrations and IP collaborations [1][4]. - **Perfect World**: - "P5X Persona" exceeded expectations in Japan, contributing significantly to revenue growth, with overseas revenue in July between 140 million to 150 million RMB, and around 80 million RMB in August [1][8]. Financial Performance - In Q2 2025, 25 major A-share gaming companies reported total revenue of 27.9 billion RMB, a 23% year-over-year increase and a 4% quarter-over-quarter increase, significantly outperforming the overall domestic gaming industry growth of 10% year-over-year and -4% quarter-over-quarter [11]. - Net profit attributable to shareholders totaled 4.6 billion RMB, a 100% year-over-year increase and a 25% quarter-over-quarter increase [11]. Profitability Metrics - The gaming sector's gross margin was 68% in Q2 2025, up 3 percentage points year-over-year and 2 percentage points quarter-over-quarter, attributed to high-quality products reducing reliance on traditional channels [3][12]. - Sales expense ratio remained stable at 33%, indicating that revenue growth was not solely dependent on user acquisition spending [3][13]. Future Outlook - The gaming sector is expected to continue its growth trajectory in the second half of 2025 and into 2026, driven by several factors: - Continued strong performance of existing popular games and new product launches [5][6]. - Expansion into international markets and new game releases, such as ST Huatuo's upcoming titles [5][6]. - Increasing demand for digital entertainment and technological advancements enhancing user experience [6]. - The valuation of the sector remains reasonable, with a central estimate below 20 times earnings, suggesting potential for continued outperformance [15]. Noteworthy Trends - The application of AI in game development and marketing is expected to enhance efficiency and quality, with significant portions of advertising content being produced by AI [15]. - Companies with strong product lines and forward-looking AI strategies, such as ST Huatuo, Giant Network, G-bits, and Perfect World, are recommended for attention [17]. Additional Insights - Older games have shown resilience, with several maintaining stable revenue streams, indicating a potential for sustained performance [7][10]. - The competitive landscape has improved, with companies leveraging community marketing and content-driven strategies to reduce traditional user acquisition costs [14]. This summary encapsulates the key points from the conference call regarding the gaming sector, highlighting the performance of specific companies, financial metrics, and future outlooks.

Core Viewpoint - The gaming sector has shown continuous growth, with revenue increasing for six consecutive quarters, and significant improvements in gross profit margins and net cash flow, indicating a robust recovery and potential for further investment opportunities [4][7][24]. Financial Performance - Total revenue for Q2 2025 reached 22.18 billion, representing a year-on-year growth of 22.3% and a quarter-on-quarter increase of 3.6%, marking the sixth consecutive quarter of positive sequential growth [7]. - Gross profit for Q2 2025 was 15.81 billion, also reflecting a sixth consecutive quarter of sequential growth [5][7]. - The overall gross margin for Q2 2025 was 71.3%, continuing an upward trend since Q3 2020, driven by a shift towards non-revenue-sharing platforms and an increase in self-developed game revenues [5][6]. Cost Management - R&D expense ratio has been on a downward trend for ten consecutive quarters, indicating a more efficient allocation of resources as companies optimize projects [6][13]. - Management expenses decreased significantly in Q2 2025, with a management expense ratio of 6%, the lowest since 2019 [13]. - Sales expenses remained stable, with a slight increase, indicating effective cost control in customer acquisition [13]. Profitability - The overall net profit attributable to shareholders for Q2 2025 was 4.16 billion, a substantial increase from 2.47 billion in the same period last year, with a net profit margin of 18.7% [14][23]. - The adjusted net profit for Q2 2025 reached 4.01 billion, marking a new high since 2019 [14]. Market Dynamics - The top five companies by revenue in Q2 2025 were ST Huatuo, Sanqi Interactive, Perfect World, G-bits, and Shenzhou Taiyue, with a combined market share of 79.9% [18]. - The top five companies by net profit were ST Huatuo, Sanqi Interactive, Kaiying Network, Giant Network, and G-bits, with a combined profit share of 81.3% [23]. Investment Outlook - The current market rally is driven by EPS improvements, with the gaming sector's valuation remaining stable and not showing signs of a bubble, as the PE-TTM ratio is around 33x, down from a peak of 45x [24]. - The sector is expected to continue benefiting from policy improvements and operational efficiencies, with recommendations to focus on companies like ST Huatuo, Giant Network, Perfect World, G-bits, and Kaiying Network [24].

Investment Rating - The report maintains a "Buy" rating for the company [2] Core Insights - The company achieved a revenue of 2.52 billion in H1 2025, representing a year-over-year growth of 28.5%, and a net profit of 640 million, with a year-over-year increase of 24.5% [7] - The second quarter saw a revenue of 1.38 billion, up 33.9% year-over-year, and a net profit of 360 million, which exceeded market expectations [7] - The strong performance in Q2 was primarily driven by the new hit game "Zhang Jian" which generated 420 million in revenue, surpassing market forecasts [7] - The company has optimized its workforce, reducing the number of R&D personnel by 30, while maintaining a high dividend payout ratio of 73.5% [7] - The company has adjusted its profit forecasts upwards, expecting revenues of 5.99 billion, 6.89 billion, and 7.16 billion for 2025, 2026, and 2027 respectively [7] Financial Data and Profit Forecast - Total revenue for 2025 is projected at 5,993 million, with a year-over-year growth rate of 62.2% [6] - The net profit attributable to the parent company is expected to reach 1,549 million in 2025, reflecting a growth rate of 63.9% [6] - The earnings per share (EPS) is forecasted to be 21.50 yuan in 2025, with a projected PE ratio of 21 [6]