China Internet Sector_Online entertainment and education 2025 outlook quantamental scorecard update

Summary of the Conference Call on the China Internet Sector Industry Overview - The conference call focuses on the China Internet Sector, particularly in online entertainment, education, and gaming for the year 2025 [2][7]. Key Insights and Arguments General Economic Outlook - Overall consumption in China is expected to weaken in 2025, with predictions of a slowdown in consumption growth [2][7]. - The term "turnaround" is emphasized for 2025, with a preference for companies that faced challenges in 2024 but show potential for recovery in their fundamentals [2][8]. Gaming Sector - China's domestic game sector revenue grew 8% YoY in 2024, indicating healthy demand despite macroeconomic challenges [3][16]. - Growth was primarily driven by a small number of blockbuster titles, with long-tail games losing market share [16]. - The new game pipeline for 2025 is expected to be less crowded, potentially leading to a higher success rate for new launches [3][17]. - The ACG genre (Anime, Comics, and Games) is anticipated to experience a resurgence, providing opportunities for NetEase's Ananta [3][17]. Education Sector - The education sector, particularly afterschool tutoring (AST), is projected to maintain good growth visibility due to stable demand and regulatory conditions [4][8]. - Companies like EDU and TAL are expected to rebound in 2025 after underperforming in 2024, with potential upward revisions in margin guidance [4][8]. Media and Advertising - The advertising market in China is expected to continue its high-beta correlation with consumption, benefiting from macroeconomic recovery [5][7]. - Short-form video (SFV) ads are predicted to outperform traditional ad formats, with companies like Kuaishou and Douyin leading the way [5][7]. Additional Important Points - The report highlights the importance of identifying less competitive genres for successful game launches, as seen in 2024 [17]. - The upcoming results for NetEase are anticipated to show upside surprises due to the return of popular titles and strong performance from new launches [18][19]. - The report includes a quantamental scorecard that evaluates companies based on fundamental outlook, valuation, and investor positioning [9][11]. Conclusion - The China Internet Sector is poised for a potential recovery in 2025, with specific opportunities identified in gaming, education, and media. Companies like NetEase, EDU, and TAL are highlighted as key players to watch for turnaround potential [2][4][8].