Recent continuous box office breakthrough events have catalyzed the attention of funds back to the media sector, with the media sector's increase this week ranking first among the Shenwan first-level industries, and the rebound trend is expected to continue.
Futu Securities APP learned that Xingye Securities issued a research report stating that the sales volume of "Black Myth: Wu Kong" has exceeded 16 million copies, igniting the hot sales of gaming devices, which is expected to drive single-player and console games to become a new growth point in the gaming market and inspire the emergence of more high-quality games and derivative cultural products combining traditional cultural intellectual property rights; the scale of card game culture and collectible card games is rapidly growing. After the adjustments since the beginning of the year, the valuation and fund holdings of the media sector have returned to historic lows. With the end of the mid-year report disclosure, the previous pessimistic expectations and market pressures have been relieved. Recent continuous box office breakthrough events have catalyzed the attention of funds back to the media sector, with the media sector's increase this week ranking first among the Shenwan first-level industries, and the rebound trend is expected to continue.
Market performance: From August 26, 2024 to August 30, 2024, the Shenwan Media sector's price fluctuation was 4.41%, outperforming the Shanghai and Shenzhen 300 by 4.58 percentage points and the Chinext Price Index by 2.24 percentage points. In the second-level industry of Shenwan media, the top three sectors with the largest gains are games, digital media, and TVB.
Key data tracking: 1) In the variety show category, Mango TV has 6 exclusively broadcast variety shows in the Top 20, and "Chinese Restaurant" and "The Great Dance" have performed excellently; Tencent Video has 7 exclusively broadcast variety shows in the Top 20, and "Joyful and Wonderful Nights" is the Top 1 hottest show on the internet; iQIYI has 3 exclusively broadcast variety shows in the Top 20, and "King of Comedy Solo Season" ranks Top 5 in internet popularity; Youku has 3 exclusively broadcast variety shows in the Top 20. 2) In the drama category, Tencent Video has 9 exclusively broadcast dramas in the Top 20, leading in quantity; iQIYI has 4 exclusively broadcast dramas in the Top 20; Youku has 3 exclusively broadcast dramas in the Top 20, and Mi Gu's "Stories of Border Waters" ranks Top 1 in internet heat.
Key points: After the adjustments since the beginning of the year, the valuation and fund holdings of the media sector have returned to historic lows. With the end of the mid-year report disclosure, the previous pessimistic expectations and market pressures have been relieved. Recent continuous box office breakthrough events have catalyzed the attention of funds back to the media sector, with the media sector's increase this week ranking first among the Shenwan first-level industries, and the rebound trend is expected to continue.
Continued catalyst of box office breakthrough events: 1) The sales volume of "Black Myth: Wu Kong" has exceeded 16 million copies, igniting the hot sales of gaming devices, which is expected to drive single-player and console games to become a new growth point in the gaming market and inspire the emergence of more high-quality games and derivative cultural products combining traditional cultural intellectual property rights. 2) The scale of card game culture and collectible card games is rapidly growing. The enthusiasm of young people for second-dimensional culture and its "grains" (peripheral products) continues to increase. According to data from Zhuoshi Consulting, the market size of China's pan-entertainment toy industry has grown from 30.5 billion yuan in 2017 to 69 billion yuan in 2022, with a compound annual growth rate of 17.8%, of which the compound annual growth rate of collectible card games is 78.4%, and the market size in 2022 is 12.2 billion yuan, and it is expected to continue to grow rapidly.
Key investment recommendations in three main lines:
1) Gaming sector. "Black Myth: Wukong" is expected to drive the growth of single-player games and increase the valuation of the gaming market. The success of "Black Myth: Wukong" also means that the "he economy" has a very broad market space, and the gaming market benefiting from the "he economy" wave is expected to accelerate its recovery. Recommended stocks include Kingnet Network and Shanghai Yaoji Technology. Recommended companies with excellent game development capabilities and good product pace in the second half of the year, such as G-Bits Network. "Black Myth: Wukong" has certain hardware requirements in order to achieve high-quality visual performance and smooth gaming experience. Therefore, it is recommended to pay attention to Hubei Century Network Technology Inc., which is positioned in the esports hotel sector, and Hangzhou Shunwang Technology, among others.
2) Traditional culture. "Black Myth: Wukong" will inspire more high-quality games and derivative cultural products that combine IP, and the enthusiasm for the creation of related cultural products is expected to continue to increase. Recommended companies include Fuwamai Culture, which has a reserve of the animated film "Three Kingdoms' Starry Sky", renowned writer Yi Zhongtian, and Beijing Enlight Media, which is developing a series of animated films in the "Chinese Myth Universe".
3) AI applications. Breakthroughs in large-scale models, multimodal AI, and other AI applications continue to emerge. Since PIKA gained popularity in December 2023, large models such as Gemma, Sora, Kimi, and GPT-4o have been catching up, witnessing the continuous improvement of AI product capabilities and the continuous enrichment of the industry chain ecology.
Guosen Securities firmly believes that with the continuous iteration of AIGC technology, there will be more hit AI products in the future, driving the growth of the media industry. It is recommended to focus on three major directions: 1) Consumer scenarios of multimodal AI applications, including gaming, movies, and other directions. Recommended stocks include Kingnet Network (002517.SZ), Shanghai Film (601595.SH), Beijing Enlight Media (300251.SZ), Zhejiang Huace Film & TV (300133.SZ), Hubei Century Network Technology Inc. (300494.SZ), and Mango Excellent Media (300413.SZ). It is also recommended to pay attention to Giant Network (002558.SZ), Beijing Baination Pictures (300291.SZ), iReader Technology (603533.SH), and Ciwen Media Co., Ltd. (002343.SZ). 2) Chinese language corpus, including text, voice, images, videos, and other corpus resources. Recommended companies include Fuwamai Culture (301052.SZ), Citic Press Corporation (300788.SZ), COL Group Co., Ltd. (300364.SZ), Anhui Xinhua Media (601801.SH), and Zhejiang Huace Film & TV (300133.SZ). It is also recommended to pay attention to Southern Publishing and Media (601900.SH), China Science Publishing & Media (601858.SH), Beijing Jetsen Technology (300182.SZ), and TVZONE Media (603721.SH). 3) Companies that focus on AI large-scale models or products. Recommended stocks include Kunlun Tech (300418.SZ).
Risk Warning: Tightening regulatory policies, slower progress in game approval, lower-than-expected effects of film and television dramas, and macroeconomic fluctuations.
