Guojin Securities Media Internet Investment Strategy for 25 Years: Seizing Alpha Opportunities to Follow the Trend and Be Optimistic About These Four Main Lines

The Zhitong Finance App learned that Guojin Securities announced the media Internet's 2025 investment strategy. Looking ahead to 2025, we are optimistic about the following four main lines: seize the opportunities of Internet leaders under the recovery of consumption; seize marginal opportunities in the content sector; the implementation of AI applications is expected to accelerate; and optimistic about the vast IP and derivatives market. Combining the four main investment lines, it is recommended to focus on leading Internet platforms with video dividends and benefiting from consumer recovery — Meituan (03690), Tencent Holdings (00700), Perfect World (002624.SZ), Kaiying Network (002517.SZ), Wanda Film (002739.SZ), etc.; the AI sector, which is optimistic that AI applications/tools based on “Chat” or algorithms will be the first to launch; focus on IP holders and targets with experience in production and operation.

Investment logic

Looking back at the 2024 media and internet sector market: stimulated by policies, there was a marked recovery in September.

1) The activity of the Hong Kong stock market has increased, and Internet companies still have allocation opportunities as core constituent stocks of Hang Seng Technology. As of November 21, 2024, the Hang Seng Technology Index had a cumulative increase of 15.85% this year, with a historical fraction of 12.89%. Internal factors: With the introduction of a series of policies, market confidence has returned, liquidity and spending power are expected to increase, and Internet companies are expected to benefit from overall macroeconomic recovery due to their platforms and consumer attributes. External factors: The Federal Reserve cut interest rates by 50BP at the September interest rate meeting. The market generally still expects interest rate cuts in the future. Hong Kong stocks benefited from marginal relaxation in liquidity between China and the US.

2) The rise and fall rate of the media industry in 2024 is basically in the middle of all Shenwan's first-tier industries. The sector showed a clear recovery in the second half of the year, with the gaming and advertising sectors leading the way. Since 2023, the media industry has been volatile and phased in strength. In summary, the core driving factors for the strengthening are mainly: ① Fundamental changes. For example, after normalized distribution of game sector versions resumed in early '23, the industry ushered in a positive beta supply. ② Industrial changes: Industrial changes such as AI, short dramas, “Black Myths: Goku”, and cards have all catalyzed A-share media performance. ③ Policy catalysis: such as monetary policies that stimulate market activity, cultural overseas policies, etc.

Looking ahead to 2025, we are optimistic about the following 4 main lines:

Main investment line 1:

Seize the opportunities of leading internet players in the face of a recovery in consumption. Since 2024, the results of Internet companies' cost reduction and efficiency have been released at an accelerated pace. According to consistent media expectations, Tencent/Meituan/Pinduoduo/Kuaishou's 24-year adjusted net profit growth forecasts were 37.46%/77.81%/84.35%/70.94%, respectively. Bilibili turned a loss into a profit in 3Q24, and Internet companies moved from traffic accumulation and business model refinement to the profit stage. After the introduction of a series of policies, market confidence will return, and liquidity and spending power are expected to increase. Internet companies are expected to benefit from an overall macroeconomic recovery due to their platforms and consumer attributes.

Main investment line 2:

Seize the marginal growth of the content sector. The game, film and television content sector is in a supply-driven stage. According to gamma data, the supply of A-share content companies was under pressure. According to the product schedules of various companies, the overall supply of games and videos in 2025 is expected to improve, and the performance is expected to improve. Currently, the product line has been gradually launched in 4Q24, and the 2025 Spring Festival program is of high quality supply, which is expected to lay a good foundation for box office recovery throughout the year; in addition, game revenue growth in Q1 is still booming. Little by little data, it is expected that short dramas going overseas will be realized in the next 3-5 years Multiple-level growth. It is recommended to focus on individual stocks with clear and determined marginal upward trends.

Main investment line 3:

The implementation of AI applications is expected to accelerate. AI application traffic is growing rapidly. According to gamma data, overall global AI product traffic increased by 87.2% in Q3. I am optimistic that AI applications/tools based on “Chat” or algorithms will be launched first, mainly because: applications/tools based on algorithms are deeply compatible with the direction of AI empowerment; Chat assistant products account for 59.9% of traffic, already have a user base, and are more mature than other types of products, and Chat products can meet companion needs, and products that can meet this type of demand are highly sticky. Focus on AI application iterations and targets that are expected to be the first to be presented on the performance side.

Investment main line 4:

I am optimistic about the broad IP and derivatives market. Consumption of IP derivatives mainly satisfies emotional value, and paying for emotional value is an important current consumer trend. The market for IP and derivatives is broad. According to the Card Game prospectus, China's Pan-Entertainment toy industry market is 69 billion yuan in 2022, which is expected to reach 128.9 billion yuan by '27. In terms of monetization, games that directly target the C-side, have greater potential and flexibility. According to gamma data, games accounted for 73.3% of the top 10 products sold in the main entertainment sector from January to September '24. The top two CAGR in the Pan-Entertainment toy industry in 2022/27 were trading cards and figures. Focus on IP holders and targets experienced in production and operation.

Risk Alerts

Consumption recovery falls short of expectations, content launch falls short of expectations, policy and regulatory risks, AI industry development falls short of expectations, and IP derivatives fall short of expectations.