Cathay Pacific Junan: The media industry is improving game products and is optimistic about the industry's repair trend

The Zhitong Finance App learned that Guotai Junan published a research report saying that since this year, the overall game market has been weak, especially since Q2 began, product supply declined, and game market revenue showed negative year-on-year growth until August and September. Game market revenue increased 15.1%/14.9% year on year. The recovery trend is remarkable. If supply continues to increase in the fourth quarter, the market is expected to improve further. Influenced by various aspects such as the policy side actively raising the level of industry standardization, improving players' appreciation ability, diversification of platforms where products can be launched, and most game companies have abundant reserves, the team is optimistic about the future game industry and continues to be optimistic about companies that have high-quality product reserves and can show an advantage in competition.

Gaming market: The industry's growth and decline improved in August-September. Since this year, the overall game market has been weak. In particular, since Q2 began, product supply declined, and game market revenue showed negative year-on-year growth in April-July until August and September. Game market revenue increased 15.1%/14.9% year on year. The repair trend is remarkable. If supply continues to increase in the fourth quarter, the market is expected to improve further. Looking at the breakdown, the trend in mobile game revenue is the main driving force. Its year-on-year growth rate turned positive to 10.5% in September, which strongly boosted the recovery of the market. In addition, players' heavy content consumption, lightweight demand, and overseas demand are worth paying attention to, corresponding to the growing trend of the three major markets of consoles, applet games, and overseas games.

A shares: Products such as Kaiying and 37 have positive schedules for 25 years, and gigabit and perfect are expected to reverse the trend. Kaiying Network is expected to launch a demo video in August 2024, including “Rainbow Orange”, “Tomb Raider: Departure”, and “Dragon Valley World”. In-hand reserves include “Doulo Continent: Legend of Demon”, “Black Cat Sergeant”, “Digimon: Source Code”, “Nasalik: Rise”; 37 Entertainment's “Doulo Continent: World of Soul Hunting”. In September, it released demo videos. The company has developed or acted as agents for more than 20 products; “M72” “M88” and the agent “One Hundred Million Light Years” are expected to be launched in 2025, and can be expected in the long term “” “M11” and “The Strongest Castle”; Perfect World's “Another Ring” had more than 2.8 million reservations on all platforms. The offline test response was overwhelming, and it is expected to be launched in 25 years.

Hong Kong stocks: Tencent NetEase leads in reserves and is excited to actively explore Bili Jinshan. Tencent's research projects are quite rich. In summary, they include three major categories, including its own IP branding, cooperation, shooting, etc., focusing on the “Fearless Contract” mobile game launch progress in the short term; NetEase's “16 Sounds of Yan Yun”, “FragPunk” and “Code Name: Infinity”; Heartfelt “Let's Go Muffin” and “Heartwarming Town” have excellent results. Follow up on the progress of expansion outside of mainland China; Bilibili's “Three Kingdoms: Designing the World” will continue to explore the game business in the long term; Kanayama Software (Nishiyamai) “Unblock Machine” tries to play against PC with mechs The field of games.

Investment suggestions: The team is optimistic about the upcoming game industry, mainly due to: 1) active policy, and the level of industry regulation is already high; 2) players' appreciation ability has improved, products can be launched on diversified platforms, and high-quality products are more likely to be recognized; 3) After experiencing relative conservatism in 2024, most game companies have abundant reserves, which are expected to provide solid support for 2025 results. Continue to be optimistic about companies that have high-quality product reserves and can show an advantage in competition.

Risk warning: New product launch progress falls short of expectations; local policy risks when going overseas; industry competition intensifies cost increases.