According to statistics, as of May 31, the stock prices of 24 game stocks rose during the year, and the stock prices of Kunlun Wanwei, Bingchuan Network, and Shenzhou Taiyue increased by more than 200% during the year.

Currently, with the normalization of game license distribution and the popularity of the AIGC concept, the game industry is booming. A week ago, the website of the National Press and Publication Administration published domestic online game approval information for May 2023. A total of 86 games were approved. Up to now, a total of 433 domestic game versions have been issued this year, close to the total of 468 games for the full year of 2022.

As AI accelerated the “competition”, a number of A-share game companies handed over their report cards for the first quarter of 2023.

According to the data, out of 26 A-share game stocks that can be counted, 5 companies lost money in the first quarter; 21 companies achieved profits in the first quarter of this year, with a cumulative profit of about 3.37 billion yuan. However, more than half of the companies saw a year-on-year decline in revenue and net profit in the first quarter. Among them, the net profit of 6 companies declined by more than 60% year on year.

Although the performance of game stocks is still under pressure, in the capital market, with the normalization of the issuance of game versions and the popularity of the AIGC concept, most game stocks experienced a rise in stock prices in the first five months of this year. According to statistics, as of May 31, the stock prices of 24 game stocks rose during the year.$Kunlun Tech (300418.SZ)$,$Shenzhen Bingchuan Network (300533.SZ)$,$Beijing Ultrapower Software (300002.SZ)$Stock prices rose more than 200% during the year.

“Looking at the overall game market at present, the overall game market is improving. The restart of version number distribution has brought about more industry companies and increased confidence in the industry as a whole. Compared to 2022, signs of industry recovery are relatively obvious. This phenomenon can also be seen from the capital market's feedback on game stocks.” Jiang Xiaoxiao, executive director of CIC Insight Consulting, said in an interview with the “Daily Economic News” reporter.

More than half of the companies' first-quarter revenue and net profit both declined year-on-year

Compared to game stock losses in 2022, overall, 26 game companies achieved cumulative revenue of about 18.5 billion yuan in the first quarter of this year, of which more than 80% were profitable.

Data shows that out of 26 A-share game stocks, 6 game companies have revenue exceeding 1 billion yuan, of which$37 Interactive Entertainment Network Technology Group (002555.SZ)$,$Zhejiang Century Huatong Group (002602.SZ)$The revenue for the first quarter all exceeded 3 billion yuan, far exceeding that of other companies.

However, compared to the same period last year, 16 companies experienced varying degrees of decline in first-quarter revenue. 37 Entertainment, Century Huatong,$Perfect World (002624.SZ)$The year-on-year declines were 7.9%, 14.1%, and 10.6%, respectively;$Kaiser (002425.SZ)$The biggest year-on-year decline was as high as 54.9%; in the year-on-year increase, the revenue growth of Glacier Network far surpassed that of other companies, reaching 43.9%.

In terms of profit, 21 game companies made profits in the first quarter, achieving a cumulative profit of about 3.37 billion yuan; 5 companies lost money. Among them, there are 10 companies with profits exceeding 100 million yuan. The most profitable company was 37 Entertainment. The net profit attributable to shareholders of listed companies in the first quarter was 770 million yuan; Century Huatong,$G-bits Network Technology (603444.SH)$Net profits of about 430 million yuan and 310 million yuan respectively followed.

Compared to the same period last year, Century Huatong,$Ourpalm Co.,Ltd. (300315.SZ)$The net profit of 4 companies including 4 companies increased by more than 100% year-on-year; Perfect World, Kunlun Wanwei, Glacier Network,$Shenzhen Zqgame (300052.SZ)$The net profit of 14 companies in the first quarter all declined to varying degrees. Among them, the net profit of 6 companies fell by more than 60% year on year; the game company with the biggest year-on-year decline was$Rastar Group (300043.SZ)$, a decline of more than 300%.

In its earnings report, Xinghui Entertainment stated, “In terms of the game business, the company is in the stage of replacing old and new games. The main game products have not yet been launched during the reporting period. The old games are in a life cycle of normal decline, which has led to a decline in revenue from the game business, which is also the main reason for the overall decline in revenue during the reporting period.”

Jiang Xiaoxiao admits that in the first quarter, as a key period for game companies, the 2023 Spring Festival period had two major characteristics: First, as the first Spring Festival in the post-pandemic era, most people in the country chose activities such as returning to their hometowns to visit their families. Offline activities took up most of the Spring Festival; on the other hand, most of the flow was taken up by existing leading games. For mid-level game companies, it still took time to launch new games, which also led to a further decline in revenue.

Ninety percent of A-share game companies' stock prices rose in the first 5 months

Compared to the “mixed results” of the first quarter, in the capital market, the stock prices of most game stocks rose in the first five months of this year.

Data shows that from January 1 to May 31 this year, the stock prices of 24 game stocks rose. Among them, the stock prices of nine companies rose more than 100%, while the stock prices of Kunlun Wanwei, Bingchuan Network, and Shenzhou Taiyue increased by more than 200%.

The “Daily Economic News” reporter noticed that although stock prices of Kunlun Wanwei and Bingchuan Network surged in the first five months of this year, the net profits of these two companies in the first quarter of this year were 210 million yuan and 190 million yuan respectively. Compared with the same period last year, they fell 43.3% and 11.9% respectively.

“Glacier Network mainly relies on the popularity of its “Super World” game, an old game. In the case of Q1 concentrated buying volume, compared to the same type of volume game, the data was indeed very impressive, and it also attracted the attention of the capital market.” According to Jiang Xiaoxiao's analysis, the main reason for the rise in Kunlun Wanwei's stock price is that it released the Kunlun Tiangong University model. As one of the manufacturers that have been intensively releasing big models in China recently, the AIGC boom has led to a rise in stock prices. However, there are still various problems in Tiangong's testing phase, and there is still a big gap from the level of ChatGPT-3.5. Whether the current popularity can continue in the future still has to be questioned.

Looking at market capitalization, as of May 31, out of the 26 game stocks counted, there were 7 companies with a total market capitalization exceeding 30 billion yuan, while 9 had a market capitalization of less than 10 billion yuan. Among them, 37 Mutual Entertainment topped the list with a total market capitalization of 72.4 billion yuan; Kunlun Wanwei followed with a total market capitalization of 68.6 billion yuan; and Century Huatong ranked third with a market capitalization of 46.4 billion yuan.

Currently, with the normalization of game license distribution and the popularity of the AIGC concept, the game industry is booming. A week ago, the website of the National Press and Publication Administration published domestic online game approval information for May 2023. A total of 86 games were approved. Up to now, a total of 433 domestic game versions have been issued this year, close to the total of 468 games for the full year of 2022.

According to Galaxy Securities research, the improvement in the overall trend of version number distribution will continue to optimize the supply side, the new game product cycle is gradually starting, and the profit side of various game companies will gradually stabilize, and at the same time drive further growth in the size of the game market.

Jiang Xiaoxiao pointed out that the overall game industry will move further this year with the launch of the Miha Tour's “Crash: Starry Sky Railway” and the situation where the next edition of “Never Land Zero” has been obtained, predicting that the game industry as a whole will move further$TENCENT (00700.HK)$, Miha Tour,$NTES-S (09999.HK)$The trend of the Big Three taking the lead continues. “Looking at the industry as a whole, the valuation level of the game industry will be on par with the current level of the three companies in the Chinese game industry. Judging from the capital market's attitude towards game companies, going overseas is still a relatively popular racetrack, and the introduction of overseas games has also become a promising direction, which has attracted the attention of many investors.”