Industry Dynamics - Shanghai has announced a policy to pilot foreign-funded game development in the city to be treated as domestically produced games, aiming to attract international companies to establish R&D teams in Shanghai [3][4] - In June, the revenue ranking of Chinese mobile game publishers was released, with Tencent, DianDian Interactive, and NetEase leading the list [5] - The "Meta Universe Neo World" in Xuhui District, Shanghai, has officially opened, featuring a 1.9-kilometer-long street with several prominent game companies participating [6] Company Developments - Tencent has restructured its organization by establishing the K9 Cooperation Department to manage strategic cooperation with Ubisoft, while dissolving several other cooperation departments [7] - BilibiliWorld is set to take place in Shanghai from July 11 to 13, with an expected attendance of 300,000 people [8] - Perfect World announced the shutdown of its new game "Million Arthur" [9][10] Compliance and Regulation - Epic Games and Samsung reached a settlement regarding mobile installation "popup harassment," resolving previous allegations of collusion with Google [11] - The European Games Association has expressed opposition to the "Stop Killing Games" movement, which aims to prevent game developers from shutting down games and teams [11] Employment Trends - King, a mobile game developer under Microsoft, announced a 10% workforce reduction, affecting studios in London, Berlin, and Stockholm [12] Esports Achievements - GEN defeated T1 with a score of 3-2 to win the 2025 MSI Championship, marking their second consecutive title [13][14]

Market Overview - The A-share market saw all three major indices rise on Monday, with the Shanghai Composite Index up by 0.35%, the Shenzhen Component Index up by 0.41%, and the ChiNext Index up by 0.66%. The total market turnover was 1,243.5 billion yuan, a decrease of 260.4 billion yuan from the previous day, with over 3,500 stocks rising [3][8]. Economic News - According to the National Bureau of Statistics, China's economy remained stable in May, with industrial production increasing by 5.8% year-on-year and 0.61% month-on-month. The service sector also showed growth, with the service production index rising by 6.2% year-on-year. Retail sales reached 41,326 billion yuan, a year-on-year increase of 6.4%, and fixed asset investment for January to May totaled 191,947 billion yuan, up by 3.7% year-on-year [4][9]. Company-Specific Insights - AstraZeneca and CSPC Pharmaceutical Group have entered into a strategic research collaboration in AI drug development, with an upfront payment of 110 million USD. The collaboration aims to discover and develop new oral candidate drugs for various diseases, including a clinical candidate for immune diseases [10][11]. - The collaboration structure includes milestone payments that could total up to 16.2 billion USD for development and 36 billion USD for sales, along with potential royalties based on annual net sales [10][12]. Industry Trends - The AI drug development sector is seeing increased collaboration among multinational pharmaceutical companies, with over 30 partnerships established in 2023, valued at approximately 10 billion USD. Domestic innovative drug assets are gaining attention from multinational companies, with transaction values rising significantly from 9.2 billion USD in 2020 to an estimated 52.3 billion USD in 2024 [11][12]. - The Chinese gaming market reported a revenue increase of 21.93% year-on-year in April 2025, driven by strong performance from long-term products and new releases. The mobile gaming sector specifically saw a revenue of 20.424 billion yuan, up by 28.41% year-on-year [18][19]. Investment Recommendations - The report suggests focusing on companies with strong platform technology barriers in the AI drug development and innovative drug sectors, as the willingness of pharmaceutical companies to pay high upfront fees indicates increased confidence in AI-generated molecules [12]. - In the gaming industry, it is recommended to pay attention to companies with rich license reserves, strong R&D capabilities, and frequent high-quality IP collaborations, as these factors contribute to stable growth in the market [20].

Core Insights - The male consumer market is projected to reach 634 million users by April 2025, with a significant increase in monthly usage time to 168 hours, reflecting a year-on-year growth of 6.9% [9][8] - The demographic shift shows an increasing proportion of male users aged 41 and above, expected to reach 48.1%, indicating an aging trend [3][8] - Online consumption capabilities among male users have improved, with 70% of users spending over 1,000 yuan, marking a 1% increase year-on-year [3][8] User Demographics - The male user base is diversifying, with a notable decline in new and second-tier cities, while first-tier cities see a 1% increase in user proportion [3][13] - The online behavior of different age groups varies significantly, with younger males (under 30) being heavy gamers, while middle-aged males (31-45) focus on family-oriented consumption [4][15] Online Behavior and Preferences - Mobile video and social platforms account for over 60% of male users' online time, with video platform usage increasing by 2.2% [11][3] - The top five industries preferred by male users include smart home products, AIGC, traffic violation inquiries, vehicle services, and automotive information, with active user numbers reaching 214 million, 157 million, 146 million, 115 million, and 109 million respectively [3][16] Age Group Insights - Users under 30 are primarily engaged in gaming, with a strong preference for strategy and shooting games, while those aged 46 and above favor traditional card games and news content [4][50] - Males aged 31-45 are characterized as new middle-class consumers, actively participating in financial investments and showing a preference for smart technology and quality consumption [35][36] Consumption Trends - The "male beauty economy" is thriving, with demand shifting from basic skincare to makeup and fragrance products, targeting young male consumers through collaborations with esports and sports IPs [31][20] - Middle-aged males are becoming key decision-makers in family consumption, increasingly favoring smart home products and technology-driven lifestyles [46][44] Media Preferences - The top apps for male users include community socializing, automotive information, and stock trading, with significant user engagement across various platforms [64][66] - For users under 30, popular apps include strategy games and social forums, while those aged 31-45 prefer car services and smart home applications [67][69] - Users aged 46 and above show a strong preference for short video platforms and news apps, indicating a shift towards digital content consumption [71][72]

Investment Rating - The industry is rated as "Outperforming the Market" with an expected increase of over 10% relative to the market index in the next six months [4][36]. Core Insights - The Chinese gaming market showed a strong performance in April 2025, with a year-on-year revenue growth of 21.93% and a month-on-month growth of 2.47%, reaching a total revenue of 27.351 billion yuan [1][14]. - The mobile gaming sector specifically saw a revenue of 20.424 billion yuan, reflecting a year-on-year increase of 28.41% and a month-on-month increase of 3.07%, driven by strong performances from long-term products and new releases [1][15]. - The global gaming market experienced a decline in revenue, with a year-on-year decrease of 0.31% and a month-on-month decrease of 4.57%, totaling 6.5 billion USD in April 2025 [2][18]. - The top three revenue-generating games globally were "Honor of Kings," "Honkai: Star Rail," and "SD Gundam G Generation ETERNAL," with the first and third benefiting from strong IP collaborations [2][21]. Summary by Sections 1. Chinese Gaming Market - In April 2025, the actual sales revenue of the Chinese gaming market was 27.351 billion yuan, with a month-on-month growth of 2.47% and a year-on-year growth of 21.93% [14]. - The mobile gaming market achieved a revenue of 20.424 billion yuan, with a month-on-month increase of 3.07% and a year-on-year increase of 28.41%, supported by strong long-term products and new releases [15]. 2. Global Gaming Market - The global mobile gaming revenue in April 2025 was 6.5 billion USD, showing a year-on-year decline of 0.31% and a month-on-month decline of 4.57% [2][18]. - The top three games in terms of revenue growth were "Honor of Kings," "Honkai: Star Rail," and "SD Gundam G Generation ETERNAL," with significant contributions from IP collaborations and new character releases [21]. 3. Revenue Rankings - In the Chinese App Store's top 10 games for April 2025, Tencent's games occupied 7 positions, maintaining a dominant market presence [24]. - The top five games included "Honor of Kings," "Peacekeeper Elite," "Gold Shovel Battle," "Dungeon & Fighter: Origin," and "Endless Winter," with Tencent holding four of these spots [24]. 4. Overseas Market Performance - The revenue from self-developed games in overseas markets reached 1.554 billion USD in April 2025, showing a year-on-year increase of 9.62% despite a month-on-month decline of 4.40% [34]. - "Honkai: Star Rail" saw a significant increase in overseas revenue, rising by 136%, while "Kingshot" experienced a 209% increase in revenue [31][34]. 5. Investment Recommendations - The report suggests focusing on companies with rich license reserves, strong R&D capabilities, frequent high-quality IP collaborations, and stable content output capabilities, as the market shows robust growth potential [33].

Core Viewpoint - Tencent's existing businesses are gradually emerging from operational cycle lows, with key games returning to healthy growth and advertising efficiency improving through integration with various platforms [1][5] Group 1: Financial Performance - Tencent's 1Q25 revenue increased by 13% year-on-year, reaching 180 billion, exceeding expectations by 2.5% [1] - Non-IFRS net profit for 1Q25 was 61.3 billion, up 22% year-on-year, surpassing expectations by 3% [1] Group 2: Gaming Business - Tencent's gaming strategy has shifted to focus on evergreen games and new game reserves, leading to a positive outlook for growth [2] - Key games like "Honor of Kings" and "Peacekeeper Elite" have shown recovery in DAU/MAU metrics, with revenue growth expected to improve in 2025 [2] - AI integration in gaming is expected to enhance content production cycles and interactivity, contributing to revenue growth [2] Group 3: Advertising Business - Advertising revenue grew by 20% in 1Q25, significantly outpacing industry averages, driven by video accounts and mini-programs [3] - AI applications in advertising are enhancing return on investment, with expectations for continued growth in 2025 [3] Group 4: Financial Technology and Cloud Services - Financial technology services showed low single-digit growth, primarily driven by loans and wealth management, while payment services faced challenges [4] - Cloud services are undergoing restructuring, focusing on profitability and optimizing gross margins, with AI capabilities expected to enhance service offerings [4]

Core Insights - The "520" marketing activities by major gaming companies have increased by nearly 10% compared to last year, with over ten companies participating this year [2] - "520" has evolved into an important romantic holiday and consumption node in China, leading to higher user engagement and discussions on social media [2][5] - The gaming industry is leveraging the "520" event to enhance brand loyalty and user stickiness through innovative marketing strategies [2][4] Group 1: Marketing Activities - Major gaming companies have launched diverse marketing activities for "520," including official lotteries, login rewards, limited-time skins, and gameplay [2] - Notable activities include "Wangzhe Rongyao" offering limited-time skin access and a collaboration with artist Alphonse Mucha for a special skin [2][3] - "Peace Elite" introduced a new character during "520," while "Lian Yu Zhi Zhi Ren" provided diamond gifts and special messages from characters [2] Group 2: Innovation and Engagement - This year's "520" activities have added new gameplay elements, such as "Wangzhe Rongyao" offering previously limited skins and "Jin Chan Chan Zhi Zhan" bringing back a special arena [3] - The intensity of marketing efforts has increased, with "Peace Elite" launching a new character and "Ni Shui Han" introducing themed costumes and a collectible pet [3][4] - Many "520" limited products require purchase, indicating a shift towards monetization strategies in marketing campaigns [3] Group 3: Revenue Impact - Sales from limited-time items, gift packs, and promotional recharge activities during "520" can significantly boost revenue and profits for popular games [4] - Historical data shows that gaming companies experience revenue spikes during key holidays like "520," Valentine's Day, and the Spring Festival [4] - The Chinese client game market saw a 3.62% quarter-on-quarter growth in early 2025, attributed to concentrated promotional activities during holidays [4]

Investment Rating - The industry rating is "Recommended" [5] Core Views & Investment Suggestions - Significant progress has been made in China-US tariff negotiations, leading to cautious optimism. The US will suspend 24% tariffs on Chinese goods for 90 days while retaining 10%, and China will reciprocate. This agreement signals a phase of easing tensions and may alleviate export chain pressures [2][22] - Three major food delivery platforms, including JD, Meituan, and Ele.me, have been summoned for discussions regarding fair competition practices. This regulatory action is expected to enhance service quality and industry standards [2][27] Market Overview - In the week of May 12-16, 2025, the Shanghai Composite Index rose by 0.76%, while the SW Media Index fell by 0.77%, ranking 29th among 31 industries [1][11] - The top-performing sub-industries included Internet services, broadcasting, and sports, with respective increases of 1.86%, 0.37%, and 0.1% [1][11] Investment Opportunities - The report suggests focusing on the following investment opportunities: 1. Hong Kong Internet leaders, which are expected to benefit from consumption promotion and employment stabilization 2. The gaming industry, which is likely to see growth due to policy incentives and technological advancements 3. The film and cultural tourism sectors, which may recover due to consumer policies stimulating demand [3][23] Industry Data - The top three films by box office revenue for the week were "Dumpling Queen" (31.914 million yuan), "Hunting Gold: Game" (27.856 million yuan), and "Life Opens the Door" (12.039 million yuan) [50][51] - The iOS game sales rankings were led by "Honor of Kings," "Peacekeeper Elite," and "Golden Shovel," while the Android rankings were topped by "Heartfelt Town," "My Leisure Time," and "Honkai: Star Rail" [52][53] - The top three TV dramas based on viewership index were "Bending the Waist," "Huai Shui Bamboo Pavilion," and "A Good Life" [56]

Core Viewpoint - The Chinese gaming industry is experiencing a "two extremes" situation, with top companies achieving record growth while mid-sized firms face declines and losses, leading to intensified competition and market concentration [2][4]. Group 1: Industry Overview - The top ten gaming companies in China are seeing significant shifts in their rankings, with the revenue threshold for entering the top ten increasing from 40 billion yuan in 2022 to 47 billion yuan in 2024 [2][9]. - Tencent and NetEase dominate the market, accounting for over 80% of the top ten's revenue, with Tencent's gaming revenue reaching 1,977 billion yuan in 2024, a 9.9% increase year-on-year [3][4]. - The overall gaming industry revenue, including domestic and overseas markets, is estimated at around 4,500 billion yuan, with the top ten companies contributing nearly 80% of this total [4][9]. Group 2: Company Performance - Tencent's gaming business has rebounded strongly, with a notable increase in revenue driven by both long-standing games and new releases, achieving a quarterly revenue peak of 595 billion yuan in Q1 2025 [5][6]. - NetEase's gaming revenue for 2024 was 836 billion yuan, with a modest growth of 2.5%, facing challenges in maintaining its dual-hit strategy due to a lack of new blockbuster games [7][8]. - Century Huatong's revenue surged by 70.3% to 226.2 billion yuan, largely due to the success of its hit game "Whiteout Survival" [3][10]. Group 3: Market Dynamics - The gaming industry is becoming increasingly concentrated, making it harder for smaller companies to compete, while opportunities still exist for mid-sized firms to create hit games [9][11]. - Companies like Bilibili and Kingsoft have made significant gains by launching successful titles, with Bilibili's gaming revenue growing by 40% to 56.1 billion yuan in 2024 [10][11]. - The decline of previously strong companies like Perfect World, which reported a net loss of 12.88 billion yuan in 2024, highlights the challenges of strategic misalignment and market competition [12][13]. Group 4: Future Outlook - The gaming industry is shifting from broad expansion to a focus on quality and innovation, with companies needing to either leverage resources to build ecosystems or specialize in niche markets to survive [13][14].

Core Insights - The Chinese gaming industry is experiencing a bifurcation, with top-tier companies achieving record growth while mid-tier and smaller firms face declines and challenges in transformation [1] - The revenue threshold for the top ten gaming companies has increased significantly, indicating a trend towards greater market concentration [1][11] - Tencent and NetEase dominate the market, with their combined revenue exceeding 80% of the top ten companies' total revenue [4][5] Industry Overview - The gaming industry is witnessing a slowdown in growth, with the top ten companies generating approximately 3.5 trillion yuan in gaming revenue for 2024, accounting for nearly 80% of the total industry revenue [4][11] - The revenue threshold for entering the top ten has risen to 4.7 billion yuan, reflecting a 17.5% increase from 2022 [11] - The competitive landscape is intensifying, with companies like Century Huatong and Bilibili leveraging hit games to improve their standings [1][12] Company Performance - Tencent's gaming revenue for 2024 reached 197.7 billion yuan, marking a 9.9% year-on-year increase, driven by both legacy and new titles [5][6] - NetEase's gaming revenue was 83.6 billion yuan, with a modest growth of 2.5%, indicating challenges in maintaining momentum [8][10] - Century Huatong's revenue surged by 70.3% to 22.62 billion yuan, largely due to the success of its hit game [3][12] Market Dynamics - The industry is increasingly favoring larger companies, making it difficult for smaller firms to compete effectively [1][11] - Companies that can innovate and create blockbuster games are more likely to survive, while those lacking in IP and product cycles may struggle [12][17] - The trend of focusing on long-standing games is becoming a more viable strategy for growth amid rising development costs [7][10] Future Outlook - The gaming market is shifting towards quality competition, with a clear divide between companies that can leverage resources to build ecosystems and those that focus on niche markets [17] - The potential for smaller companies to carve out niches remains, but they must innovate and adapt to changing market conditions [12][17] - The success of companies like Bilibili and Century Huatong suggests that opportunities still exist for those willing to invest in quality and creativity [12][13]

Core Viewpoint - Tencent's 2024 financial report shows a revenue of RMB 660.2 billion, an 8% year-on-year increase, and a non-IFRS net profit of RMB 222.7 billion, up 41% year-on-year [1] Group 1: Financial Performance - In Q4 2024, Tencent's revenue reached RMB 172.4 billion, a 11% increase year-on-year, with a non-IFRS net profit of RMB 55.3 billion, up 30% year-on-year [1] - The company's gross profit for Q4 was RMB 90.7 billion, reflecting a 17% year-on-year growth [1] - The operating profit for Q4 was RMB 51.5 billion, a 24% increase compared to the same period last year [1] Group 2: Business Segments - The gaming business generated RMB 580 billion in international market revenue, a 9% increase, driven by strong performances from titles like PUBG MOBILE and Supercell games [14] - Domestic gaming revenue grew by 10% to RMB 1,397 billion, supported by popular titles such as Valorant and Naruto [14] - Marketing services revenue increased by 20% to RMB 1,214 billion, attributed to strong demand for advertising on platforms like WeChat and video accounts [43] Group 3: User Metrics - WeChat and WeChat users reached 1.385 billion, a 3% year-on-year increase [12] - QQ users decreased by 5% to 524 million, while the number of paid value-added service members grew by 7% to 262 million [12] Group 4: Cash and Investments - As of the end of 2024, Tencent's cash net worth was RMB 76.8 billion, with total cash and cash equivalents at RMB 132.5 billion [54] - The fair value of listed investments was RMB 569.8 billion, while the book value of non-listed investments was RMB 335.6 billion [55] Group 5: AI and Future Outlook - Tencent is focusing on AI by restructuring its AI team and increasing capital expenditure on AI-related projects [57] - The management believes that investments in AI will enhance advertising efficiency and extend the lifecycle of games, creating long-term value [57] - Tencent's competitive advantage lies in its massive user base and flow of traffic, which supports its growth in various business segments [64]