According to Zhitong Finance APP, on November 20, the domestic game approval number was issued in advance this month. The National Press and Publication Administration announced the approval information of domestic online games for November 2024 in the evening, with a total of 112 new games approved, marking the second consecutive month of more than 110 approvals. The approved new games include 7 mobile and client games, 1 mobile and web game, and the remaining 104 are mobile games (including 46 leisure puzzle mobile games). According to statistics, a total of 1,274 new games have obtained approval from the beginning of the year to date, of which 1,184 are domestic games and 90 are imported games, surpassing last year's total of 1,075. Huaan Securities pointed out that the game industry policies are relatively stable, with low policy risks, allowing existing domestic games to operate steadily, and the continuous issuance of approvals for new games. Under the combined influence of AI + stable policies + companies continuously launching new games and good financial performance in the external industry + policies + internal initiatives from companies, the game industry is expected to usher in a recovery.

Among the newly approved games, the products from listed companies mainly include: Shenzhen Bingchuan Network's (300533.SZ) "Trend Play Adventure Team," Kingnet Network's (002517.SZ) "Hungry Sword, Primal Glory," Shenzhen ZQGame's (300052.SZ) "Mars Lost Day" and "Flame Flying Snow: Conquest," Yoozoo Interactive's (002174.SZ) "Endless Treasure Chest," China Mobile's (600941.SH) Migu Culture's "Martial Arts Turn Knife," ST Huatuan's (002602.SZ) "消消闯天下," Zhejiang Jinke Tom Culture Industry's (300459.SZ) "Adventure Legion," 37 Interactive Entertainment Network Technology Group's (002555.SZ) "Guardians of Douluo," Zengame's (02660) "Finger Burger," Friendtimes's (06820) "Xiu Xiu Lian Meng," and Oriental Pearl Group's (600637.SH) "Extreme Archer."

Specifically, this year, the approval number for domestic games has maintained a monthly issuance frequency, with approvals exceeding one hundred for 9 months within the year (including this month). Imported games have been approved 5 times, with a frequency that has improved compared to last year.

Institutional figures stated that the steady issuance of approvals is beneficial for the market to maintain a continuous supply.

This year, the overall game large cap has been weak, especially since Q2, with a reduction in product supply, leading to negative year-on-year growth in game market revenue from April to July. It wasn't until August and September that a rebound began, with game market revenue growing by 15.1% and 14.9% year-on-year, demonstrating a significant repair trend. If supply continues to increase in the fourth quarter, the market is expected to improve further. Analyzing the data, mobile game revenue trends are the main driving force, with its year-on-year growth turning positive to 10.5% in September, significantly contributing to the recovery of the large cap. Additionally, the heavy content consumption, light demand, and overseas demand from players are worth noting, corresponding to growth trends in home console, mini-program games, and game exports markets.

In the A-share market, Kingnet, 37 Interactive Entertainment, and other products scheduled for 2025 are active, with g-bits network technology and perfect world likely to turn their trends around.

In 2024, kingnet network is expected to launch products including "Rainbow Orange," "Tomb Raider: Start," and "Dragon Valley World," with reserves in hand including "Douluo Dalu: The Legend of Evil Slaying," "Black Cat Sheriff," "Digital Monster: Source Code," and "Nazarick: Rise"; 37 interactive entertainment network technology group "Douluo Dalu: Soul Hunting World" has already showcased a demonstration video in August 2024 and opened reservations, with a battle demonstration video scheduled for release in September, the company has more than 20 self-developed or agency products in hand; g-bits network technology is self-developing "M72" and "M88," and is expected to launch the agency game "Billion Light Years" in 2025, with expectations for "M11" and "Strongest Castle" in the long term; perfect world has over 2.8 million reservations for "Other Circles" across all platforms, with a strong response in offline testing, expected to launch in 2025.

In the Hong Kong stock market, tencent and netease lead in reserves, while xindong, bilibili, and kingsoft are actively exploring.

Tencent has a wealth of research projects, which include three main directions: own IP branding, collaboration on globally recognized IP games, and advantages in shooting and other categories, with a short-term focus on the launch progress of the mobile game "Valorant"; netease has projects like "Yanyun Sixteen Sounds," "FragPunk," and "Code: Infinity"; xindong's "Let’s Set Off, Muffin," and "Xindong Town" have performed well, with follow-ups on expansion progress outside mainland china; bilibili is operating "Three Kingdoms: Strategize the World" in the long term, continuing to invest in game business exploration; kingsoft (Xishan Residence) is attempting to enter the mech battle PC game field with "Limit Break Machine."

Moreover, the growth of the game market scale is optimistic, ensuring growth potential.

According to gamma data statistics, in Q3 2024, the scale of the china game market is 91.8 billion yuan, up 8.92% year-on-year, and up 22.96% quarter-on-quarter. Among them, the mobile market scale is 65.7 billion yuan, up 1.21% year-on-year. The game industry continues to recover, and the operational capabilities of game companies are being validated. Additionally, the valuations of game companies remain relatively low, with healthy financial conditions and good cash flow reserves, enabling them to provide support during upward cycles.

GTJA believes that optimism toward the subsequent game industry primarily stems from: 1) Positive policies, with a high level of industry regulation; 2) Improved player appreciation ability and diversified product launch platforms, making high-quality products more easily recognized; 3) After experiencing a relatively conservative 2024, most game companies have rich reserves in hand, expected to provide solid support for performance in 2025. Continuing to be bullish on companies with quality product reserves that can demonstrate advantages in competition.

Related concept stocks:

Tencent Holdings (00700): In Q3 2024, the company's online games revenue grew by 13% year-on-year, which is basically in line with expectations. Among them, domestic game revenue increased by 14% year-on-year, slightly exceeding expectations, driven by games including "Valorant," "Honor of Kings," "Peace Elite," and "Dungeon and Fighter: Origin." According to disclosures from Nexon, in Q3 2024, its revenue from the china region increased by 138% year-on-year. In addition, the company's earnings conference revealed that the revenue of "Honor of Kings" grew year-on-year, while "Peace Elite" saw double-digit year-on-year revenue growth, with evergreen game operations continuing to thrive.

NetEase (09999): The new game "Naraka: Bladepoint" was launched on July 23 in Q3, with a significant growth in PC games due to the return of Blizzard's "World of Warcraft", where DAU increased by 50% compared to before the shutdown. In Q4, the expected return of Blizzard's "Hearthstone" is anticipated to bring a significant increase in mobile games, with DAU increasing by 150% compared to before the shutdown. The mobile games "Yanyun Shiliusheng" and "Seven Days World" are also in reserve.

CMGE (00302): CMGE insists on creating a diversified IP game ecological system, forming a core competitive advantage of "IP resource - independent R&D and joint R&D - global distribution - self-operated IP operation - Chinese-style metaverse platform", with a complete plan for new game releases and abundant product reserves.