CITIC Securities: Improved media profits are accompanied by increased structural differentiation of content, overseas travel, and AI

The Zhitong Finance App learned that CITIC Securities released a research report saying that 2026H1 media industry revenue was +3.60% YoY, net profit to mother +11.47% YoY, and 26Q2 net profit to mother was +26.02% YoY. Industry growth was concentrated more on companies with product cycle, content advantages, globalization capabilities and AI implementation capabilities. The bank believes that the core of the next phase of the media industry is to find companies that can continuously transform high-quality content, IP, channels, and technical capabilities into revenue, profit and cash flow; the product cycle, AI commercialization, overseas, and IP operations will form the main line of growth, while high dividends will provide value side support, and investment opportunities in the industry will continue to reflect a strong structural nature.

CITIC Securities's main views are as follows:

Industry Overview: Steady revenue growth, 26Q2 profit improvement, continued structural differentiation

Based on the bank's statistics for the target pool of listed companies in the media industry, the 2026H1 media industry achieved operating income of 282,827 billion yuan, +3.60% year-on-year; net profit to mother was 24.957 billion yuan, +11.47% year-on-year. 26Q2 achieved revenue of 143.85 billion yuan in a single quarter, +2.92% year-on-year and +3.51% month-on-month; net profit to mother was 14.242 billion yuan, +26.02% year-on-year and +32.91% month-on-month. The profit side improved significantly faster than revenue. By sector, games are still the most important contributor to the industry's revenue and profit growth. Advertising and marketing revenue remains resilient but profits are under pressure, and film and television theaters and publishing are still in the adjustment stage. The bank believes that the current media industry is not entering an overall boom, but rather that on the basis of moderate growth in total volume, performance is further concentrated on companies with product cycles, high-quality content, globalization, and the ability to implement new technologies.

Gaming: The product cycle has achieved high growth, and the next stage is more about the continuation of growth

The fundamentals of the 2026H1 game industry continued to be strong. The actual sales revenue of the domestic game market was 18.45 billion yuan, +12.17%, and incremental markets such as clients and applets showed outstanding performance; during the same period, overseas revenue for self-developed games in China was US$12.372 billion, +30.22% year-on-year, and the advantage of going overseas was further expanded from traditional SLG to various categories such as synthesis and leisure. Listed companies' product cycles were realized centrally, with 26Q2 net profit of +73.50% year-on-year and +49.57% month-on-month. Product scale effects and improvements in operational efficiency drove profit elasticity clearly leading revenue. At the same time, performance growth was further concentrated on leading companies with clear product cycles. There is a clear divergence between the fundamentals of the H1 industry and the performance of the secondary market, indicating that the market's weight on the high growth pricing that has already been realized has declined, and the focus is gradually shifting to the resilience of mature products, the rise in new products, and the high certainty of growth in 2027. Looking ahead to 26H2, key companies are still rich in product reserves. Subsequent products that can continuously verify the flow rate and promote the improvement of 2026E/2027E profit forecasts will be the key for the sector to regain excess revenue.

Marketing: The market is growing steadily but profits are divided, and AI and going overseas have become structural increases

The 2026H1 advertising market continued to grow as a whole. Advertisement case spending was +8.5% year-on-year, but budget growth was concentrated more on AI applications, internet platforms, and high-ROI channels. The marketing sector's 26Q2 revenue was +1.38% YoY, and net profit to mother was -23.53% YoY. Revenue resilience has yet to be fully translated into profit growth. On the one hand, businesses such as overseas advertising and programmatic marketing continue to expand, but gross margin gradually dilutes profit levels; on the other hand, AI is penetrating the entire link from idea generation to marketing optimization, operation management, and model services, and commercial value is beginning to move from internal efficiency improvement to revenue-side verification. The bank believes that the core of the next phase of the marketing sector is whether new overseas sales and AI can be further transformed into improvements in gross profit margin, profit, and cash flow. Companies with high ROI media resources, programmatic platforms, and AI product capabilities are more likely to continue to generate excess revenue.

Cinema and IP: Restoring the supply of high-quality content, opening up incremental space for IP operations, short dramas, and AI dramas

The first half of 2026 was affected by the pace of content supply, and the performance of the movie box office and movie theater sector was under year-on-year pressure. However, box office and movie viewers of the summer program resumed growth, driven by top films, and the recovery in long video content filings is also expected to drive the gradual restoration of industry supply. At the same time, leading companies continue to deepen long-term IP operations and expand non-ticket revenue through brand licensing, derivative consumption, and offline experiences; the micro-drama and AI drama markets are expanding at an accelerated pace, and some companies have formed a closed loop between content production, platform distribution, and overseas commercialization. Looking ahead, the restoration of the supply of high-quality content is expected to drive the traditional film and television business to improve, while IP commercialization, short dramas, and AI content will open up new growth space and performance flexibility for the industry.

Publication: Main business resilience supports dividends, high dividends strengthen allocation value

The book retail market is still in the adjustment stage in the first half of 2026. The revenue and profit of the publishing sector declined year on year, but the market decline was narrower than in the first quarter. Profit in the second quarter improved markedly from month to month, and gross margin remained steady and rising. In mid-2026, 6 companies, including Phoenix Media, Xinhua Wenxuan, and Anhui New Media, plan to pay a total cash dividend of about 872 million yuan; based on cash dividends for the past 12 months, a total of 10 companies in the sector have dividends of 4% or more, of which 7 companies have reached 4.5% or more. Leading companies are also actively exploring incremental businesses such as AI education. In the context of maintaining resilience in main business operations and continuation of dividend policies, high dividend characteristics are expected to continue to support sector allocation value.

Risk factors:

The implementation of AI applications falls short of expectations, and the risk of technological iteration; fluctuating advertising demand, and macro-consumption restoration falls short of expectations; insufficient verification of emerging business models; stricter content regulations, and the launch of content such as games, film and television falls short of expectations; industry competition intensifies, purchasing costs increase, and net interest rates fluctuate; fluctuations in the surrounding environment have affected cultural media going overseas.

investment strategy

I am optimistic about the continued advancement of the AI industry and the promotion of IP commercialization to the media sector industry. It is recommended to focus on the performance improvement brought about by the new product cycle in the game sector and the increase in performance brought about by IP commercialization. It is recommended to select targets from three dimensions: 1) For those with excellent performance and high bonus points, it is recommended to focus on the direction of gaming, marketing, publishing, etc. 2) New technology and new consumer trends. New technology suggestions focus on AI, and new consumer trends suggest focusing on IP commercialization. The AI proposal focuses on games, marketing, education, etc.; the 2C application proposal focuses on companion products; the IP commercialization proposal focuses on the millet economy, AI toys, and animated films. 3) Under the easing of regulations, the game and film industry has entered a stable development channel, and the operations of companies with high-quality content reserves are expected to continue to improve. Maintain the media industry's “better than the market” rating.