Investment Rating - The report maintains a "Buy" rating for the industry, indicating a positive outlook for the sector's performance relative to the benchmark index [6][34]. Core Insights - The media industry saw a weekly increase of 2.04% from January 12 to January 18, 2026, outperforming major indices. Digital media led the gains with a 10.38% increase, while other segments like publishing and advertising also showed positive growth [2][12]. - Key themes for investment include AI applications and cultural exports, with a focus on sub-sectors such as gaming, intellectual property (IP), short dramas, marketing, and publishing [4][34]. Summary by Sections Market Performance - The media industry outperformed major indices with a 2.04% increase during the week of January 12-18, 2026. Digital media surged by 10.38%, while publishing rose by 3.32%, and advertising marketing increased by 2.58%. The gaming sector saw a modest rise of 1.57%, whereas the film and television broadcasting segments experienced slight declines [2][12]. Industry Key Data AI Applications - Recent downloads for AI applications on iOS were estimated at 27.93K for Deepseek, 208.27K for Doubao, 78.91K for Tencent Yuanbao, and 106.66K for Qianwen, with respective week-on-week changes of -8.79%, -0.67%, -9.86%, and +25.84%. The weekly token call volume on the OpenRouter platform reached 7.65 trillion, marking an 18.97% increase [3][18]. Gaming Data - The top five mobile games on iOS as of January 17, 2026, were "Honor of Kings," "Peacekeeper Elite," "Dungeon & Fighter: Origin," "Three Kingdoms: Strategy Edition," and "Genshin Impact: Moonlight Song." Tencent's "Counterattack: Future" launched and quickly gained over 10 million registered users within three days [3][18][20]. Film Data - The total box office for domestic films during the week was 280 million yuan, with "Hidden Kill" leading at 63.73 million yuan, accounting for 22.7% of the total. Other notable films included "Zootopia 2" and "Avatar 3" [26][27]. Investment Recommendations - The report recommends focusing on AI applications, cultural exports, and specific sub-sectors such as gaming, IP, short dramas, marketing, and publishing. Notable companies to watch include Giant Network, Kying Network, Perfect World, and others [4][34].

Investment Rating - The investment rating for Tencent Holdings is "Outperform the Market" (maintained) [2][8][23] Core Views - Tencent is expected to achieve revenue of CNY 194.6 billion in Q4 2025, representing a year-on-year growth of 13%. The network advertising sector is anticipated to perform steadily, benefiting from the release of advertising inventory and AI integration. The gaming business is expected to show strong performance, particularly with the game "Delta Operation" [4][9] - The company is increasing its investment in AI, which is expected to offset some operational leverage release. The AI investment will primarily manifest in R&D expenses, projected to grow by 28% in Q4 2025 [4][10] - The gaming segment is projected to generate revenue of CNY 58 billion in Q4 2025, with a year-on-year growth of 18%. Domestic game revenue is expected to grow by 16%, supported by established titles like "Honor of Kings" and "Peacekeeper Elite" [5][15][21] - Marketing services revenue is expected to reach CNY 41.3 billion in Q4 2025, reflecting an 18% year-on-year increase, driven by AI enhancements in advertising efficiency [6][19] - Financial technology and enterprise services are projected to grow by 9% year-on-year, with revenue expected to reach CNY 61.2 billion in Q4 2025, primarily driven by payment services [20] Summary by Relevant Sections Financial Performance - Q4 2025 revenue is expected to be CNY 194.6 billion, with a 13% year-on-year increase. Non-IFRS operating profit is projected at CNY 68.1 billion, up 15% year-on-year, and net profit is expected to be CNY 65.2 billion, reflecting an 18% increase [4][10][11] - The expected Non-IFRS net profit margin is 34% for Q4 2025 [10] Gaming Business - The gaming revenue forecast for Q4 2025 is CNY 58 billion, with an 18% year-on-year growth. Domestic game revenue is expected to grow by 16%, while overseas game revenue is projected to increase by 22% [5][21] Marketing Services - Marketing services revenue is anticipated to be CNY 41.3 billion in Q4 2025, marking an 18% year-on-year growth. AI-driven enhancements are expected to improve advertising efficiency significantly [6][19] Financial Technology and Enterprise Services - Revenue from financial technology and enterprise services is expected to reach CNY 61.2 billion in Q4 2025, with a 9% year-on-year growth, primarily driven by payment services [20]

Company Overview - Tencent's main businesses in gaming, advertising, finance, and enterprise services are expected to maintain high-quality growth, with AI accelerating talent deployment [1] Gaming Performance - Domestic gaming revenue is projected to grow by 12% year-on-year in Q4, supported by stable performance of established games like "Honor of Kings" and rising revenue from new titles like "Delta Action" [1] - Overseas gaming growth is expected to normalize with a 24% year-on-year increase in Q4, driven by high revenue from Supercell's "Clash Royale" [1] - For 2026, revenue growth is anticipated to be influenced by deferred income from high revenue in 2025 and upcoming titles such as "Honor of Kings World" and "Crossfire: Rainbow" [1] Advertising and Financial Services - Advertising revenue is expected to grow by 19% year-on-year in Q4 2025, with healthy growth anticipated in 2026 due to deeper utilization of ecosystems like video accounts and mini-programs, as well as enhanced user engagement through AI [2] - Financial and enterprise services revenue is projected to grow by 10% year-on-year in Q4 2025, with financial services experiencing a potential slowdown in payment growth due to macroeconomic disturbances [2] - Enterprise services are expected to benefit from revenue growth in video account e-commerce technology services and cloud computing [2] AI Strategy and R&D Investment - Tencent's AI strategy is entering an accelerated phase, with significant R&D investments expected to continue growing [2] - The appointment of former OpenAI researcher Yao Shunyu as Chief AI Scientist and the release of the 2.0 version of the mixed Yuan model in December highlight the company's commitment to AI development [2] Financial Forecast and Valuation - Revenue forecasts for 2025 remain unchanged, while the 2026 revenue forecast has been slightly reduced by 1% to 831.7 billion yuan [2] - Non-IFRS profit estimates for 2025 and 2026 have been increased by 1% to 262.9 billion yuan and 294.8 billion yuan, respectively, with new projections for 2027 set at 903.5 billion yuan in revenue and 326.9 billion yuan in profit [2] Rating and Target Price - The company maintains a "outperform" rating with a target price of 700 HKD, corresponding to 19x/17x 2026e/2027e Non-IFRS P/E, indicating an 11% upside from the current stock price [3]

Investment Rating - The industry investment rating is "Positive" and maintained [7] Core Insights - The new game cycle in January continues with several products like "Duck Duck Goose" and "Heart Town" launching successfully. The trend of Chinese games going overseas remains strong, with leading companies like Dd and others showing impressive performance. The industry is expected to see a series of new game launches, leading to continuous catalysts [2][4] - The gaming sector's product cycle in 2026 shows strong sustainability and performance certainty, indicating room for valuation improvement. It is recommended to continue focusing on investment opportunities in the gaming sector, with relevant companies including Giant Network, Kaiying Network, Perfect World, 37 Interactive, G-bits, Yaoji Technology, Shengtian Network, Tencent Holdings, and Xindong Company [2][4] Summary by Sections New Game Launches - The January new game cycle has seen successful launches, including "Duck Duck Goose," which has gained significant popularity, and "Heart Town," which topped the global free charts in over 50 regions during its pre-download phase [2][4] - The performance of these new games validates the importance of global expansion and social interaction as growth engines in the gaming industry, with a strategy of "evergreen games + globalization" becoming key for leading companies [10] Overseas Market Performance - The overseas gaming market continues to thrive, with Dd's "Whiteout Survival" achieving over $4 billion in global revenue by December 2025. Other games like "Tasty Travels: Merge Game" and "Truck Star" have also shown strong performance in the overseas market [10] Future Game Releases - Upcoming game releases include Tencent's "Counter-Strike: Future" on January 13, "Rock Kingdom: World" on March 26, and several others from various companies, indicating a busy launch schedule that may catalyze further industry growth [10]

Core Viewpoint - MiHoYo has taken significant legal action against game content leaks, reflecting its challenges in maintaining growth despite the success of its flagship games, Genshin Impact and Honkai: Star Rail [1][8]. Group 1: Legal Actions and Industry Impact - MiHoYo's "Special Action Against Game Leaks" has resulted in criminal measures against leakers and court orders to cease infringement activities [1][3]. - The leaked content includes unreleased game characters and software testing packages, with over 260 leakers held accountable [3][5]. - Industry experts warn that leaks can lead to competitors mimicking content, potentially damaging MiHoYo's reputation as an original creator [5][6]. Group 2: Financial Performance and Challenges - Genshin Impact has been a major revenue source, contributing over 70% of MiHoYo's income since its launch in 2020 [3][8]. - MiHoYo has faced declining rankings among mobile game publishers, often falling out of the top three in revenue [8][11]. - The player base for Genshin Impact is showing signs of fatigue, with some long-term players considering quitting due to repetitive gameplay and high costs associated with character acquisition [11][12]. Group 3: New Game Releases and Market Reception - MiHoYo's new title, Honkai: Star Rail, has become the second-largest revenue contributor since its release in 2023 [3][8]. - The new IP, Zenless Zone Zero, has underperformed, generating only one-third of Honkai: Star Rail's first-month revenue and dropping out of the iOS top 100 within 41 days [12]. - MiHoYo is attempting to diversify its game offerings, as seen with the upcoming release of Honkai: Star Rail's new game, Honkai: Inheritance Spirits, to compete in various genres [12][13].