Investment Rating - The report rates the industry as "Outperform" [6] Core Insights - Emotional consumption and the rise of the "Guzi economy" are driving the growth of the trendy toy market, with the Z generation leading a new landscape. By 2024, the population of the pan-2D community in China is expected to exceed 500 million, with a market size of approximately 600 billion yuan, and the Guzi economy alone surpassing 150 billion yuan [1][24] - The trendy toy industry is characterized by a "one strong, many strong" pattern, with Pop Mart leading the industry, while foreign brands like LEGO and Bandai hold a certain market share. Domestic brands such as Blok and Card Game are also experiencing rapid growth, with IP operation and overseas market expansion being key future directions for the industry [1][4] Summary by Sections 1. Emotional Consumption and the Rise of Trendy Toys - Emotional consumption has emerged as a new economic driver, with trendy toys becoming a significant social label for consumers. These toys provide emotional value, helping to alleviate anxiety and affirm consumer identity [22][23] - The Guzi economy, which focuses on IP-derived peripheral products, is deeply integrated with 2D culture, creating a vibrant narrative and emotional connection for consumers [23][24] - The market for trendy toys is expected to grow significantly, with the pan-entertainment toy market projected to exceed 1 trillion yuan by 2029, and the trendy toy market reaching 110 billion yuan by 2027 [1][36] 2. Growth Drivers: Blind Boxes, Building Toys, and Card Games - Blind boxes are driven by the thrill of the unknown, with a market size expected to reach 580 billion yuan by 2025. The consumer base is predominantly female, with 75% of buyers being women, and the Z generation pushing for a shift towards mid-to-high-end products [2][67] - Building toys are designed for all age groups, with a market size projected to reach 640 billion yuan by 2028. Local brand Blok leads this segment, focusing on educational aspects [2][3] - The card game market, driven by rarity and low pricing, is expected to reach 446 billion yuan by 2029, with Card Game holding a dominant position [2][3] 3. Competitive Landscape and Key Players - Leading companies such as Pop Mart, Blok, and Card Game are driving industry development through differentiated competition. Pop Mart focuses on IP incubation and blind box mechanisms, while Blok emphasizes educational scenarios through building blocks [4][5] - The market is becoming increasingly concentrated, with Pop Mart holding a 28% market share in the blind box segment. The CR5 of the blind box market is expected to rise from 38% in 2020 to 50% in 2024 [76] 4. International Expansion and Lessons from Overseas - The report highlights the importance of IP-driven multi-business ecosystems, as seen in successful overseas companies like Disney and Bandai. These companies leverage their IP across various platforms, creating a robust business model [4][56] - Chinese toy companies are actively expanding into international markets, with significant growth in exports to the US and Central Asia. This diversification is crucial for mitigating risks associated with reliance on single markets [56][57]

Company Overview - Shifeng Culture Development Co., Ltd. (stock code: 002862) is a high-tech enterprise established in 1992, headquartered in Shantou, Guangdong Province, with over a hundred proprietary patents [6] - The company focuses on two core business segments: toys and games, with a product range exceeding 1,000 types sold in nearly 100 countries [6] - The company has adapted its product strategy to include three main product lines: smart electric toys, trendy toys, and AI toys [6] Game Business Strategy - The company targets the casual gaming sector, investing in research and development with a creative team to innovate gameplay that meets the needs of casual gamers [7] - The game product line is diverse, catering to various player demographics and preferences through effective advertising strategies [7] AI Technology Integration - AI technology is seen as a new business incubator for the toy manufacturing industry, addressing the limitations of traditional toys and enhancing consumer engagement [8] - The global AI toy market is projected to reach $36.377 billion by 2030, driven by trends in "loneliness economy" and "AI technology revolution" [8] AI Product Launches - The company plans to launch its next-generation AI toy, AI Magic Star, in 2024, featuring advanced interactive capabilities for children [9] - Another AI toy, AI Flying Rabbit, is set to be released in June 2025, showcasing significant advancements in responsiveness and interaction [9] Challenges in AI Development - The company faces challenges in balancing interaction naturalness with content safety, implementing a dual-filter algorithm to ensure safe interactions for children [10] - The algorithm must achieve low-latency responses while maintaining content security, which involves optimizing model complexity and processing speed [10] Competitive Landscape - AI is reshaping the competitive landscape in the toy industry, with companies leveraging advanced algorithms and data processing to create smarter toys [11] - The company is focusing on product innovation and market expansion, targeting diverse consumer needs from children's education to elderly companionship [11] Strategic Measures for Competitive Advantage - The company collaborates with universities and research institutions to accelerate AI technology application in toy products [12] - Continuous product innovation and brand building are prioritized to enhance market position and consumer loyalty [12] AI Governance and Data Security - The company has established a compliance assurance system to adhere to data protection regulations, ensuring user consent and data security [13] - A multi-layered security framework is in place for data transmission, with certifications for information security management [14] Future Outlook - The company envisions AI toys evolving from functional tools to emotional companions and growth guides, aiming to bring joy and security to families [15]