Key investment points

Incident: On December 12, 2024, Giant Network released the “QianYing” audio game generation model at the China Game Industry Annual Conference, including YingGame, a large model for game video generation, and YingSound, a large video dubbing model.

Focus on personalizing character interactions, and AI enhances the user experience in multiple dimensions. As a large-scale video generation model for open world games, YingGame enables interactive control of various character actions for the first time. Game characters can be customized, and it also has better game physics simulation characteristics. Combined with YingSound, a large self-developed video dubbing model, it can generate complex sound effects that match the image to achieve sound game video generation. Through a series of technological innovations, the company's new achievements integrate cross-modal features, fine-grained character characterization, motion enhancement and multi-stage training strategies to build an efficient and high-quality game video training data production pipeline to enhance the user experience in multiple dimensions.

Multi-modal full-matrix layout, “AI+” deeply empowers game business innovation and development. Based on video generation technology, the company demonstrated the possibility of creating games through text descriptions. Furthermore, the company's AI laboratory will continue to explore and promote the upgrading and iteration of model capabilities. The company also launched the “Thousand Shadows Co-Creation Program” based on big model base technology to open up cooperation, application implementation, and talent recruitment in model technology, model applications, and original game projects. Based on the company's management philosophy, the company continues to explore the direction of lowering the game development threshold, integrating AI game development technology, or building an AI game incubation platform to continuously empower the company's game business and ecological innovation and development.

Investment proposal: The company released the “QianYing” audio game generation model to continuously iterate AI technology to accelerate the rapid transformation of AI+ from cost reduction and efficiency to disruptive innovation. We forecast that the company's revenue from 2024 to 2026 will be 3.297 billion yuan, 3.673 billion yuan, and 4.018 billion yuan, respectively; net profit to mother will be 1.395 billion yuan, 1.716 billion yuan, and 1.947 billion yuan, respectively; EPS will be 0.72, 0.89, and 1.01 yuan, respectively; corresponding PE will be 17.9, 14.5, and 12.8, respectively; maintaining the “buy” proposal.

Risk warning: policy uncertainty, AI implementation progress falling short of expectations, potential risks of AI copyright licensing, etc.