Summary of the Conference Call for Giant Network Company Overview - **Company**: Giant Network - **Key Game**: Supernatural Action Group Industry Insights - The gaming industry is expected to see a revival in 2025, with the domestic self-developed game market projected to grow nearly 20% [doc id='2'][doc id='26'] - The overall gaming market is becoming more resilient, with increased total playtime and user spending [doc id='26'][doc id='27'] - The supply side of the gaming industry has seen a significant increase in the number of game licenses issued, rising from over 80 per month in 2023 to 166 in August 2025 [doc id='28'] Key Points on Supernatural Action Group - The game has maintained strong revenue performance due to frequent skin updates and IP collaborations, with expected revenue of 4-5 billion CNY in September 2025 [doc id='2'][doc id='3'] - The user base is expanding to include male players, similar to the model of Pop Mart, which could further enhance market reach [doc id='2'][doc id='4'] - The game is projected to achieve an annual revenue of 30-40 billion CNY in 2026, with a profit margin of 40%-50% [doc id='2'][doc id='10'] - Marketing expenses are focused on high ROI content and brand investments, rather than broad advertising [doc id='11'] Financial Performance and Projections - Giant Network's stable core business includes the Journey series, which contributes approximately 30 billion CNY annually, and other games like Ball Battle and Space Kill, expected to contribute 16-17 billion CNY [doc id='12'][doc id='13'] - The company’s profit forecast for next year is between 35 billion to 40 billion CNY, with a potential market capitalization of 1 trillion CNY if valued at 25 times earnings [doc id='13'][doc id='24'] - The third quarter is expected to show significant growth, with profits potentially doubling from the second quarter [doc id='24] Market Dynamics - The competitive landscape is shifting, with large companies focusing on optimizing existing games rather than launching new blockbuster titles, creating opportunities for mid-sized companies like Giant Network [doc id='29] - The gaming industry is experiencing a self-optimization phase, with companies refining their teams and project pipelines to improve success rates [doc id='31'][doc id='32'] AI and Marketing Trends - AI has been integrated into game development processes, enhancing productivity without leading to significant layoffs [doc id='34'] - Sales expense ratios are decreasing due to a shift from traditional advertising to more effective content and community marketing strategies [doc id='33'] Investment Recommendations - Recommended investments include Giant Network and ST Huatuo, with projected market capitalizations of 1.2 trillion CNY and 1.5 trillion CNY respectively [doc id='36]

Investment Rating - The report maintains a "Strong Buy" investment rating for the company [2][5]. Core Insights - The company reported a revenue of 1.662 billion RMB for the first half of 2025, representing a year-on-year growth of 16.47%, and a net profit of 777 million RMB, up 8.27% year-on-year. In Q2 alone, revenue reached 938 million RMB, with a growth of 28.42%, and net profit was 429 million RMB, growing by 17.49% year-on-year [1][5]. - The company has a robust pipeline of new games, with the self-developed game "Supernatural Action Team" showing rapid user and revenue growth since its launch, although its main contributions will be recognized in future reporting periods due to revenue deferral [5]. - The flagship mobile game "Original Journey" has performed excellently, with a significant increase in user base and stable monthly revenue of 100 million RMB. The company also continues to innovate in the casual gaming sector [5]. - The company is actively embracing AI technology, collaborating with major firms to enhance gaming experiences and user engagement [5]. Financial Performance - The company’s total revenue is projected to reach 4.413 billion RMB in 2025, with a year-on-year growth of 51%. The net profit is expected to be 2.056 billion RMB, reflecting a growth of 44% [6][9]. - The company’s financial ratios indicate a healthy growth trajectory, with a projected PE ratio of 29.4 for 2025, decreasing to 16.3 by 2027 [9][6]. - The company’s cash flow from operating activities is expected to improve significantly, reaching 2.796 billion RMB by 2027 [7]. Market Position - The company has a total market capitalization of 6.04 billion RMB, with a strong return on equity (ROE) of 10.6% [2][5]. - The company’s debt levels are low, with an asset-liability ratio of 13.4%, indicating strong financial stability [2][9].

Investment Rating - The report maintains a "Buy" rating for the company [9]. Core Views - The company achieved revenue of 938 million yuan in Q2 2025, representing a year-on-year increase of 28.42% and a quarter-on-quarter increase of 29.64%. The net profit attributable to the parent company was 429 million yuan, up 17.49% year-on-year and 23.37% quarter-on-quarter [2][5]. - The game "Supernatural Action Group" has shown exponential growth in user scale and revenue, reaching a peak of over 1 million concurrent users in July. The game has consistently ranked in the top 10 of the iOS free games chart and reached a highest position of 4 in the iOS revenue chart [6]. - The company’s deferred revenue has increased significantly, with confirmed deferred income of 889 million yuan as of June 30, 2025, compared to 761 million yuan on March 31, 2025, and 498 million yuan in Q2 2024. This increase is expected to continue contributing to revenue growth [6]. Summary by Sections Financial Performance - In the first half of 2025, the company reported total revenue of 1.662 billion yuan, a year-on-year increase of 16.47%. The net profit attributable to the parent company was 777 million yuan, up 8.27% year-on-year [5]. - The company’s Q2 2025 revenue was 938 million yuan, with a net profit of 429 million yuan and a non-recurring net profit of 444 million yuan [2][5]. Game Performance and Development - The game "Supernatural Action Group" has achieved significant user growth and revenue, with a stable monthly revenue of around 100 million yuan for "Original Journey" and a total of over 20 million new users in the first half of the year [6]. - Several new games are in the pipeline, including "Five Thousand Years" and "Famous Generals Kill," which are expected to contribute to future revenue growth [7]. Sales and Marketing - Sales expenses increased to 317 million yuan in Q2 2025, with a sales expense ratio of 33.8%. However, the overall return on investment (ROI) from marketing efforts remains favorable [7]. - The company is actively pursuing a comprehensive layout of games combined with AI technology, enhancing user engagement and playtime [7]. Profit Forecast - The company is projected to achieve net profits of 2.26 billion yuan and 3.18 billion yuan in 2025 and 2026, respectively, corresponding to price-to-earnings ratios of 26.2 and 18.6 [7].

Core Viewpoint - Giant Network reported a revenue of 1.662 billion yuan for the first half of 2025, representing a year-on-year growth of 16.47%, and a net profit attributable to shareholders of 777 million yuan, up 8.27% year-on-year [1] Group 1: Financial Performance - The company plans to distribute a cash dividend of 1.5 yuan per 10 shares, amounting to approximately 284 million yuan, marking the third consecutive year of mid-year dividends since 2023 [1] - Monthly average revenue for the flagship mobile game "Original Journey" has stabilized at 100 million yuan, supporting sustainable business development [1] Group 2: Game Development and User Growth - The newly launched game "Supernatural Action Group" has seen exponential growth in user base and revenue, with over 1 million concurrent users in July [2] - "Original Journey" has successfully added 5.86 million new users in its first month after launching a mini-game version, with total new users exceeding 20 million in the first half of the year [1] - "Ball Ball Battle" has improved user retention and reputation, with over 11 million new users in the first half of 2025, showing a month-on-month increase [2] Group 3: AI Integration and Innovation - The company is integrating AI technology into its core gaming business, enhancing product interaction and gameplay mechanisms [2] - The game "Space Kill" continues to iterate on AI-native gameplay, maintaining industry leadership [3] - Collaboration with cloud service providers like Volcano Cloud, Alibaba Cloud, and Tencent Cloud is ongoing to advance AI applications in the gaming sector [3]

Group 1 - The core viewpoint of the news is that Giant Network has reported significant growth in revenue and net profit for the first half of 2025, driven by the success of its self-developed game "Supernatural Action Team" [1] - The company achieved operating revenue of 1.662 billion yuan, a year-on-year increase of 16.47%, and a net profit attributable to shareholders of 777 million yuan, up 8.27% year-on-year [1] - The game "Supernatural Action Team" has seen rapid growth in user base and revenue, with a milestone of over 1 million concurrent users reached in July, and it ranks in the top 5 of the iOS free game chart and top 4 in the iOS revenue chart [1] Group 2 - The company plans to distribute a cash dividend of 1.50 yuan per 10 shares, totaling approximately 284 million yuan, marking the third consecutive year of mid-year dividends since 2023 [1] - The "Journey" IP continues to develop its "evergreen game" strategy, with flagship mobile game "Original Journey" achieving 5.86 million new users in its first month after launching a mini-game version, and over 20 million new users in the first half of the year [1] - The average monthly revenue for "Original Journey" has remained stable at 100 million yuan [1] Group 3 - The game "Ball Ball Battle" has seen significant innovation in gameplay, leading to a substantial increase in daily participation rates and improved user retention and reputation [2] - In the first half of 2025, the game accumulated over 11 million new users, with a monthly upward trend, and daily active users exceeding 1 million on mini-program platforms [2]

Investment Rating - The report maintains a positive investment rating for the media and internet industry, particularly highlighting leading companies in various segments such as gaming, IP, and live streaming [1]. Core Insights - The media sector has seen a 2.39% increase over the past week, ranking 6th among all industries, and a year-to-date increase of 13.62%, ranking 3rd overall. This growth is attributed to policy support for sub-industries like gaming and a shift in market perception towards "emerging consumption" [1]. - The report emphasizes the long-term growth potential of cultural, sports, gaming, and live streaming sectors as part of China's consumption upgrade, driven by rising GDP per capita [1]. - The gaming industry is currently valued at approximately 17 times earnings, indicating a reasonable valuation with safety margins despite multiple favorable factors such as policy support and accelerated overseas expansion [1]. Summary by Sections Market Performance Review - The media industry index increased by 2.39% from June 30 to July 6, outperforming the Shanghai Composite Index, which rose by 1.40% [10]. - The top-performing stocks in the media sector during this period included Giant Network with a 17.42% increase and other companies like Jibite and 37 Interactive Entertainment [12][13]. Key Data in Film and Gaming Industries - The top films by box office for the week included "Jurassic World: Rebirth" with a box office of 298.34 million and "Detective Conan: The One-Eyed Phantom" with 125.00 million [18]. - In the gaming sector, the top mobile games included "Honor of Kings" and "Peacekeeper Elite," both published by Tencent, dominating the iOS sales rankings [31]. Television and Streaming Insights - The highest-rated TV drama was "Jinxiu Fanghua" with a rating of 2.075% on Hunan TV, while the top web dramas included "In the Name of Law" and "Jinxiu Fanghua" [22][24]. - The top variety show was "Keep Running Season 9," leading the ratings with a broadcast index of 79.4 [28]. Emerging Consumption Trends - The report identifies emerging consumption as a new market focus, with significant user engagement and consumption potential observed in sectors like gaming, trendy IPs, music, and sports events [1]. - The report suggests a 2-3 year investment horizon for quality leading companies in these sectors, emphasizing the importance of content creativity and operational capabilities [1].

Summary of Giant Network Conference Call Company Overview - **Company**: Giant Network - **Industry**: Gaming Key Points and Arguments 1. **Valuation and Growth Potential**: The gaming sector's overall valuation is between 16 to 17 times, with a long-term upward trend expected when excluding AI-related entities. The upcoming summer season and AI application data are anticipated to perform well, suggesting an overweight recommendation for the gaming sector [2][4]. 2. **2025 Performance Outlook**: Giant Network's performance growth for 2025 is highly certain, with significant valuation elasticity. The stock price is expected to rise due to dual catalysts from the summer season and the implementation of AI multimodal models [2][5]. 3. **Game Launch Success**: The game "Supernatural Action Group" has shown strong performance post-launch, with peak daily revenue exceeding one million on iOS. Monthly revenue is projected to reach 20 million, with optimistic scenarios suggesting 60 million to 100 million, translating to annual revenue between 500 million to 1.2 billion [2][6]. 4. **Target Demographic**: The user profile for "Supernatural Action Group" skews towards young female players, a demographic known for high mobile game spending, indicating strong potential for summer performance [2][6]. 5. **Future Development Directions**: Giant Network aims to transition from single-category casual games to multiple categories, including a shift from MMO to SLG in mid-to-heavy value games. Current profit forecasts do not yet account for new card and SLG categories, with impacts expected to reflect in next year's reports [2][7]. 6. **AI Application Strategy**: Since 2023, Giant Network has been actively pursuing an AI application strategy, with a structured approach that, while slower than competitors like Kaiying Network, still shows promising development potential [2][7][8]. 7. **Comparison with Kaiying Network**: Both companies are exploring AI applications, but Giant Network has a clearer strategic layout and steadier implementation pace compared to the more aggressive approach of Kaiying Network [2][8]. 8. **Current Valuation Assessment**: The current valuation of Giant Network is approximately 17 times, which is considered attractive for investment. The company's performance, profit structure, and long-term logic indicate a positive improvement trend, supported by organizational changes made by CEO Zhang Dong [3][9]. Additional Important Insights - **Market Share Growth**: The A-share gaming sector is expected to gain market share due to weaker product lines from major competitors [4]. - **Product Line Stability**: Existing products, including "Ball Battle" and "Space Sand," have shown stable performance and growth, contributing to the overall positive outlook for the company [5].

Group 1 - The Ministry of Commerce announced the key enterprises and projects for cultural exports for 2025-2026, with popular online games like "Genshin Impact" and "Arknights" included as key projects [3][4] - A total of 404 enterprises and 121 projects were recognized through a multi-step evaluation process involving various government departments [3] - 16 game titles were selected as key export projects, accounting for over 13% of the total, with nearly half of these games coming from Shanghai-based companies [4][6] Group 2 - Industry analyst Zhang Shule highlighted that online games serve as a new medium for cultural export, effectively immersing overseas players in Chinese culture [5] - The success of Chinese games abroad is attributed to their unique style and cultural integration, combining traditional Chinese elements with familiar themes for international audiences [5] - Nearly 100 companies with gaming operations were included among the key enterprises, such as Tencent, NetEase, and miHoYo, indicating a robust presence in the cultural export sector [6]

Core Viewpoint - The article discusses the recent financial troubles faced by Shi Yuzhu, a prominent entrepreneur, due to frozen shares linked to personal guarantees, raising concerns about the stability of his company, Giant Network [3][4][6]. Group 1: Financial Issues - Shi Yuzhu's company, Giant Investment, has a newly reported execution amount exceeding 490 million yuan, with the Beijing Financial Court involved [3]. - The total amount of frozen shares related to Shi Yuzhu has surpassed 3.9 billion yuan, indicating significant financial strain [14]. - Previous instances of share freezes occurred in 2021, highlighting a pattern of financial difficulties linked to personal guarantees [6][4]. Group 2: Company Operations and Strategy - Despite financial issues, Giant Network continues to focus on its core gaming business, particularly the "Journey" series, which remains a significant revenue source [26][28]. - The company has successfully launched new products, including the mini-program game "King of Journey," which attracted over 25 million new users and generated 600 million yuan in revenue [30]. - Shi Yuzhu's return to the gaming sector is marked by a strategic shift to enhance user experience and reduce reliance on high spending by players [31][32]. Group 3: Market Position and Future Outlook - Giant Network's revenue for 2024 was reported at 2.923 billion yuan, showing a slight decline of 0.05%, while net profit increased by 31.15% to 1.425 billion yuan [28]. - The company has shifted its focus from the metaverse to AI technologies, integrating AI tools to improve operational efficiency and game development [35][38]. - The ongoing challenges in the gaming market, including competition from mobile and MOBA games, pose risks to Giant Network's long-term growth potential [30][31].

Core Viewpoint - The article discusses the recent financial troubles of Shi Yuzhu, a prominent entrepreneur, due to frozen shares amounting to over 490 million yuan, raising concerns about the stability of his investment platform and associated companies [1][2][9]. Group 1: Financial Issues and Legal Troubles - Shi Yuzhu's company, Giant Investment, has been listed as a defendant in a court case with an execution amount exceeding 490 million yuan, indicating significant financial distress [1]. - Previous instances of share freezes have occurred, with a notable freeze of 114 million yuan due to similar issues related to personal guarantees [2][4]. - The total amount of frozen shares related to Shi Yuzhu has surpassed 3.9 billion yuan, highlighting ongoing financial challenges [9]. Group 2: Business Operations and Strategic Moves - Despite stepping back from frontline operations, Shi Yuzhu has been involved in significant capital operations, including a failed attempt to list Playtika, which he acquired for approximately 44 billion yuan [11]. - Giant Network has attempted to diversify its revenue streams by venturing into internet finance, achieving revenues of 3.13 billion yuan in 2017, but later exited the sector due to regulatory pressures [17][18]. - The company has focused on its flagship game "Zhengtu," which continues to be a major revenue source, generating 29.23 billion yuan in revenue, albeit with a slight decline [21]. Group 3: Market Position and Future Outlook - The "Zhengtu" series remains a cornerstone of Giant Network's business, with new user acquisition strategies contributing to its sustained popularity [23]. - The company has shifted its focus from the metaverse to AI technologies, enhancing game development efficiency and player experience through AI-driven features [30]. - The ongoing challenges in maintaining player engagement and addressing the concerns of non-paying players could impact future growth prospects for the "Zhengtu" franchise [24][25].