According to Zhito Finance APP, GF SEC has released a Research Report stating that in 2024, the attention towards console and PC games will increase, and the market scale is expected to expand. In 2025, companies will have a rich reserve of new products, and their performance upon launch is highly anticipated, which is likely to drive a turnaround in the Sector's performance. At the same time, AI continues to empower the Sector, and the implementation of new applications is expected to boost Sector valuations. Furthermore, with the improvement of mergers and acquisitions by gaming companies and the release of new products, a noticeable positive effect is expected for the companies. It is recommended to actively monitor the progress of mergers and acquisitions in the gaming market.

GF Securities' main points are as follows:

A-shares companies are experiencing a product turning point, which is expected to drive a turnaround in the Sector's performance.

Recently, the overall performance of new products in A-shares has been excellent. In the SLG sector, data from Qimai shows that Zhejiang Century Huatong Group's 'Endless Winter' has consistently ranked high after its May launch. In the MMO sector, new games have broken through; Perfect World's 'Zhu Xian World' announced on its official WeChat that it exceeded 0.3 million in queue on the first day of launch. 37 Interactive Entertainment Network Technology Group's 'Time Explosion' and G-bits Network Technology's 'Question Sword Long Life' officially launched on January 2, and data from Qimai shows both products ranked high in the free list on the first day, indicating a significant increase in the impact of new games.

At the same time, companies are well-prepared and ready to go. According to each company's official website and Wind, 37 Interactive Entertainment Network Technology Group's major IP product 'Douluo Continent: Hunting Soul World' and Kingnet Network's 'Dragon Valley World' are expected to launch in the first half of 2025, while Beijing Ultrapower Software's 'Code DL' and 'Code LOA' are gradually advancing towards commercialization. A-shares companies have outstanding performance with their newly launched products, a rich reserve of new products, and remain competitive in the Industry, with the product cycle expected to drive a turnaround in performance.

Industry mergers and acquisitions enhance company value, pay attention to the progress of mergers and acquisitions.

Reviewing the acquisition paths of Take Two and Zhejiang Century Huatong Group, acquisitions are an important way for gaming companies to grow. As a creative industry, acquisitions help companies attract excellent intellectual resources, enrich product lines, continuously produce outstanding works, and drive company growth.

With the improvement of acquired companies' integration and the release of new products, there is hope for significant positive effects for the company. The business model of the gaming industry is excellent, and leading companies are usually cash-rich, suggesting active attention on mergers and acquisitions in the gaming market.

AI continues to empower the Sector, driving valuation increases.

AI has diverse applications in gameplay and support functions, and has already begun to integrate into game categories such as reasoning and sandbox. Companion products have a high market acceptance and are expected to become a breakthrough direction for applications. Traditional game categories are actively introducing AI technology to enhance playability.

Overall, the ability to combine AI with gameplay continues to improve. In addition, AI-related development tools are continuously being perfected, which is beneficial for accelerating game development and testing new gameplay, thereby attracting new users, increasing payments, expanding the gaming market scale, and enhancing Sector valuation.

Investment suggestion: In 2025, A-share companies are well-reserved, with performance elasticity, and AI empowerment is expected to boost industry valuation.

Continuously recommend Kingnet Network (002517.SZ) (“Legend” basic plate is stable, multiple products are accumulating), Perfect World (002624.SZ) (“Zhu Xian World” launched with excellent performance, “Yihuan” has potential, layoffs driving cost reduction), Beijing Ultrapower Software (300002.SZ) (new SLG launched, expecting operational performance), 37 Interactive Entertainment Network Technology Group (002555.SZ) (new products for the “Douluo” IP expected to launch, recent new games performing well), G-bits Network Technology (603444.SH), XD INC (02400) and others; suggest paying attention to ST Huatong (002602.SZ) (“Endless Winter” sales rankings are high), Shanghai Yaoji Technology (002605.SZ), Hangzhou Electronic Soul Network Technology (603258.SH), Shenzhen Bingchuan Network (300533.SZ), IDREAMSKY (01119) and others.

Risk warning: Risks of strengthened regulation in the gaming industry, risks of intensified industry competition, and risks of product launches not meeting expectations.