The Zhitong Finance app learned that on December 4, the State Press and Publication Administration released approval information for domestic online games in November. A total of 87 games were approved. These include NetEase S (09999) “Beyond the World”, “War Chronicles of the Ant Clan”, “Battle Song of the Contract”, and “The Seal of Mythius” by Zhongqingbao. Up to now, a total of 931 game versions (including 58 imported games) have been released this year, and the number is close to the 1,000 mark expected by the agencies. The Dongwu Securities Research Report also pointed out that it is optimistic that the performance of the gaming sector will continue to recover, and that AI is empowering to support the upward elasticity of valuations. Related targets: NetEase - S (09999), China Mobile Games (00302), Dream World (01119), Tencent Holdings (00700).

Among the games approved this time, there is no shortage of heavyweight IP titles, such as Perfect World's “Immortals 2” and Youzu Network's “Journey to the West 2,” which are highly anticipated in the industry. Among them, “Immortals 2” is a “new next-generation fairy cloud native game showing the quality of the 3A console”. “Young Man to the West 2” was once called “Code Name: The Walker” and developed spontaneously by Youzu Network. It is a Silk Road punk style fantasy card RPG game. Currently, the number of reservations on the official website exceeds 560,000.

In addition, “From Stardust” was approved by Eagle Point Network and received a high level of attention. The game is the first buyout mobile game launched by the company. Currently, the official website has opened pre-orders. TapTap has now received 900,000 reservations, with an internal rating of 8.3 million. Also, there is Lilith's “Sword and Expedition: Departure”. Currently, reservations have been opened on the official website, and TapTap has more than 100,000 reservations.

Up to now, a total of 931 game versions (including 58 imported games) have been released this year. The number has surpassed 579 in 2022 and 748 in 2021, approaching the 1,000 mark predicted by the agencies.

According to the “2023 Gaming Semi-Annual Report”, from January to June 2023, the number of game users in China reached 668 million, an increase of 0.35% over the previous year, reaching a record high. Up to now, a total of 931 game versions (including 58 imported games) have been released this year, and the number is close to the 1,000 mark expected by the agencies.

Huaxi Securities said that it continues to recommend the game industry. After the overall correction in the sector, the allocation is cost-effective. The current valuation is relatively low. The focus is on high-quality companies that promote mini-games, have product reserves, and catalyze, compounded by the overall improvement in Hong Kong stock sentiment. Beneficial targets include: NetEase, Tencent, and 37 Mutual Entertainment.

The Dongwu Securities Research Report also pointed out that it is optimistic that the performance of the gaming sector will continue to recover, and that AI is empowering to support the upward elasticity of valuations.

Looking ahead to the future market: 1) On the supply side, the technology and cultural attributes of games are being continuously recognized. Game versions are expected to continue the trend of high-quality distribution, and the supply of new tours in the industry is expected to continue to improve.

2) On the performance side, a new round of the industry's product cycle has begun, and various manufacturers have launched new tours one after another, which will drive a gradual recovery in market size, and manufacturers' performance is expected to be repaired one after another.

3) On the valuation side, the implementation path for AI to reduce the cost and efficiency of games is clear, and various major manufacturers have tried to implement it one after another. “AI+” gameplay innovations have also launched exploration products such as Zitian Technology and Kunlun World Wide. It is optimistic that the valuation corresponding to “AI+ games” is expected to break through cloud gaming in 2019 and the metaverse market in 2021.

Related concept stocks:

NetEase -S (09999): NetEase's blockbuster IP masterpiece “Shoko” is known as an S-grade IP product, and is very hopeful that it will become another flagship product of NetEase. In addition, J.P. Morgan Chase added NetEase to the bank's positive catalytic watch list. It is estimated that it will benefit from the strong performance of many of its games, such as the “Against the Water” mobile game, “Egg Party,” “All Star Street Ball Party,” “Pinnacle Speed,” and “Never Fell.” J.P. Morgan estimates that the company's game revenue growth in the third and fourth quarters of this year is expected to be better than expected.

China Mobile Games (00302): Huaan Securities believes that the company insists on building a diversified IP game ecosystem, forming a core competitive advantage based on “IP resources - independent research and development - global distribution - own IP operation - Guofeng metaverse platform”. The new game launch plan is complete, product reserves are abundant, self-research strength is strong, user praise is high, and the valuation level is reasonable.

Dream World (01119): According to a research report released by SPDB International, the core game of Chuangmeng World has maintained a steady rise. The company “Subway Parkour” has remained at the top of the iOS free list recently. The company has increased user activity and payment rates through continuous product content iteration. The company plans to launch the 10th anniversary version of “Subway Parkour” in November, which is worth looking forward to. “Dream Home” and “Dream Garden” have maintained stable user activity and payment rates through the development of new levels and joint IP, and are expected to achieve positive year-on-year revenue growth throughout the year.

Tencent Holdings (00700): In the second quarter of 2023, Tencent's game business revenue was 44.5 billion yuan, up 5% year on year, its international game revenue was 12.7 billion yuan, up 19% year on year, and local game revenue was 31.8 billion yuan, the same as the previous year. Ma Xiaoyi, senior vice president of Tencent Gaming, said that they will work with leading companies to use “Fearless Contract” as a global strategic product, invest in the long term, and jointly promote the development of products, e-sports, and all aspects of the IP ecosystem.