According to a report released by BOC International, the domestic gaming market in China will be vibrant this year, especially in the second half of the year, mainly due to the launch of various high-quality new games across multiple categories. Meanwhile, it is believed that the gaming policy in the second half of the year will remain stable and positive.
However, the bank believes that under the current macro environment and fierce market competition, domestic companies will adopt strategies to ensure long-term stable operation, such as user acquisition, user engagement, activity and retention-oriented, mildly commercial behavior, increasing gross margin, and reasonable investment in game development and operation.
The bank believes that Tencent (00700.HK) and Netease (09999.HK) have attractive game business and corresponding group valuations. Regarding Tencent, the bank believes that the better performance of app-based games (domestic and overseas) and high-quality revenue brought by strong growth in small games this year will support its fundamentals. Regarding Netease, the bank believes that the recent rumor and speculation reactions in the market are excessive, and the internationalization process will be a key factor to further increase its long-term valuation. The bank maintains a "shareholding" rating for the gaming industry.