In terms of games, the number of domestic game licenses issued in August reached a new high since 2019, and the improvement of the basic face is expected with the gradual release of the pipeline.
According to the intelligence of the Financial and Economic APP, Tianfeng Securities released a research report, stating that the number of game licenses issued in August reached a new high since 2019. The recent phenomenal product "Black Myth: Wukong" has also been recognized by the central media, indicating that the industry policy environment is improving. At present, A-share game companies have rich reserves of games such as "Douro Mainland: Legend of Zu Xie", "The Lost Tomb: Departure", and "Nasalik: Rise". Tianfeng Securities predicts that with the improvement of the new game release window, the release of the pipeline of A-share game companies is expected to accelerate, and attention should be paid to the potential improvement of the underlying fundamentals driven by the launch of new games.
Last week (August 26th to August 30th, 2024), the Shenwan Media Index rose by 4.41%, ranking first among all sectors, while the Shanghai Composite Index fell by 0.43%, and the Chinext Price Index rose by 2.17%. In terms of sectors, the game sector rose by 7.27% last week, the movie theater sector rose by 3.43%, the advertising marketing sector rose by 3.3%, the publishing sector rose by 0.79%, and the TV and radio broadcasting sector rose by 3.95%.
In terms of IP derivatives, a report from Burning Insight mentioned that in 2022, the market size of the trading card industry in the United States, China, and Japan, based on the total trading volume of goods, was RMB 17.2 billion yuan, RMB 12.2 billion yuan, and RMB 11.4 billion yuan, respectively. The market size of the trading card industry in Southeast Asia has reached RMB 1.7 billion yuan, and it is expected to grow rapidly in the next five years. Focus on companies that are involved in IP card games and other related layouts. Recommended stocks to watch: Shanghai Film (601595.SH), Shanghai Yaoji Technology (002605.SZ), and Alpha Group (002292.SZ).
In terms of games, the number of domestic game licenses in August reached a new high since 2019, and the gradual release of the pipeline is expected to improve the fundamentals.
1) Several companies announced their second quarter financial results last week. For Ultralistic Software, its 2Q24 revenue increased by +9% YoY and +5% QoQ, while its net income attributable to the parent company increased by +49% YoY and +14% QoQ. For 37 Interactive Entertainment Network Technology Group, its 2Q24 revenue increased by +12% YoY and -6% QoQ, while its net income attributable to the parent company increased by +44% YoY and +5% QoQ. For Zhejiang Century Huatong Group, its 2Q24 revenue increased by +66% YoY and +18% QoQ, while its net income attributable to the parent company increased by +17% YoY.
2) In August, a total of 117 domestic game licenses were issued, reaching a new monthly high since 2019 according to our statistics. The number of domestic and imported game licenses issued from January to August increased by +39% YoY. The list of approved games in August includes Tencent's "Under the Sun", Yingjiao Network's "Arknights: Apocalypse", Netease's "Beyond the Border", Perfect World's "Let the Savage Fly", 37 Interactive Entertainment Network Technology Group's "Dou Po Cang Qiong: Xiao Yan Legend", Lingxi Interactive Entertainment's "The Dawn of the Wilderness", Yoozoo Interactive's "Chess War", and Kemok Software's "Guardian of the Islands".
3) In August, the number of game licenses issued reached a new high since 2019. Combined with the recent phenomenon-level game "Black Myth: Wukong" being recognized by the central media, it shows that the industry policy environment is improving. At present, A-share gaming companies have rich reserves of games, such as Kingnet Network's "Douluo Continent: Legend of the Killing God", "Tomb Notes: Departure", "Narsil: Rise", and so on; Gibits' "Asking Sword Eternal Life", "Legend of the Staff Sword"; 37 Interactive's "Douluo Continent: Soul Hunting World", "Son-in-Law", etc. We expect that with the improvement of the new game release window, the release of A-share gaming company pipelines is expected to accelerate, and we will continue to pay attention to the potential improvement of the basic face driven by the launch of new games. Recommended stocks: [Beijing Ultrasonic Software (300002.SZ), Kingnet Network (002517.SZ), Shanghai Yaoji Technology (002605.SZ), G-Bits Network Technology (603444.SH), Giant Network (002558.SZ)].
In terms of movies, the National Film Administration released data on the 1st, stating that from June 1 to August 31, the box office of China's 2024 summer films reached 11.638 billion yuan, with an audience of 0.284 billion. Among them, "Claw Doll" took the lead in the summer box office with a box office of 3.254 billion yuan, and "Silent Murder", "Alien: Death Ship", "There's a Little Store at the Cloud's Edge", and "Deadpool and Wolverine" ranked 2nd to 5th in the summer box office.
In the 2024 summer season, more than 100 films were released, covering various genres such as drama, animation, documentary, comedy, action, suspense, romance, etc. The supply of films is relatively sufficient, and the diverse genres and types of films meet the diversified viewing needs of the audience. Currently, a total of 6 films, including "Crisis Line" and "Safe Entry and Exit", have been scheduled for release during the National Day holiday, and the release of supply is expected to stimulate potential market demand and drive the overall box office to continue rising.
Recommended stocks: [Maoyan Entertainment (01896)] Participate in the production/distribution of multiple films during key periods, optimistic about the contribution elasticity. In the summer season, the company participated in the release of 18 films, including "I Don't Want to Be Friends with You", "Silent Murder" (main investment and control+distribution, total box office over 1.3 billion yuan), "Claw Doll" (production+distribution, total box office over 3.254 billion yuan), "Decryption" (production), "Against the Current Life" (production), "Against the Scales" (production+distribution), "Rebirth" (production+distribution), etc. Currently, the company participates in the production of "Crisis Line" and "Safe Entry and Exit" during the National Day holiday. [Wanda Film (002739.SZ)] The concentration of cinemas and the synergy of the content sector under the recovery of the overall market, the company has participated in the schedule of 6 films in the summer season, including "Claw Doll" (production+distribution) and "White Snake: Floating Life" (production+distribution).
In the publishing sector, the industry has strong defensive attributes. Companies generally have strong operational barriers and a stable ability to distribute dividends. Throughout the year, we remain optimistic about the publishing industry with high dividends, and recommend paying attention to high-quality local state-owned enterprises with abundant cash and deep channels, such as Changjiang Publishing & Media (600757.SH). As well as companies with high dividend yields and dividend expectations, actively expanding into new businesses such as smart education, after-school services, and experiential learning, such as Shandong Publishing & Media (601019.SH).
Risk warning: The US and European markets face continued interest rate hikes and high inflation rates; the domestic epidemic may recur; domestic economic growth may slow down; the impact of policy stimulus may be insufficient.