According to the Futu Securities research report obtained by Sina Finance APP, the review of the market performance of the media sector in the fourth quarter of the past five years highlights the drivers of the media market, including trends in Shenzhen New Industries Biomedical Engineering, sector undervaluation, and expectations for performance improvement. At present, Futu Securities remains bullish on the market in the fourth quarter of this year. First, looking at the changes in the industry, there is a global acceleration in AI video, with overseas Meta releasing Movie Gen, while domestic companies such as Douyin and Kuaishou have impressive effects, and expectations are high for the AI video releases of KIMI and Jieyue Xingchen later this year. In terms of sector valuation, the media index has been adjusting for a year since June 2023, with still over 40% upside potential from the previous high. Regarding the expectation of performance improvement, game companies are expected to launch new products intensively in 4Q24-1Q25, which could drive performance recovery.

Futu Securities deep dives into the market performance of the media sector in the fourth quarter over the past five years: From 2019 to 2023, the market trends at the beginning of the fourth quarter usually last 1-2 quarters, with an average index range increase of 30%, outperforming the sse composite index by an average of 27%.

In reviewing the historical market trends, the core drivers over the years include three main points: 1. Trends in Shenzhen New Industries Biomedical Engineering, such as 5G applications/cloud gaming at the end of 2019, live streaming e-commerce/MCN at the end of 2020, metaverse at the end of 2021, Generative AI at the end of 2022, and short films/MR applications at the end of 2023. 2. Sector undervaluation: Over a 10-year period, the media sector has been in a downtrend since 2015, with an average PE (TTM) of 20-25x, currently ranking within the top 30% of historical valuations. Looking at phases, the first three quarters of 2021-2023 have completed substantial downward adjustments. 3. Expectations for performance improvement: For example, in the first half of 2020, increased gaming time due to the pandemic; the relaxation of controls at the end of 2022 is expected to improve performance in cyclical marketing/film/games.

Currently, Futu Securities firmly sees a positive outlook for the market in the fourth quarter of this year: 1. In terms of industry changes, there is global acceleration in AI video, with overseas Meta releasing Movie Gen, domestic platforms Douyin and Kuaishou showcasing impressive effects, and anticipation for AI video releases of KIMI and Jieyue Xingchen later this year; the IP and card game sectors are experiencing a period of high prosperity. 2. Looking at sector valuation, the media index has been adjusting for a year since June 2023, still with over 40% upside from the previous high, where gaming valuation averages to less than 15x, and the film and television industry underwent significant adjustment in the third quarter due to underperforming summer releases; 3. Regarding expectations for performance improvement, game companies are scheduled to release new products intensively in 4Q24-1Q25, potentially driving performance improvement; film and television companies have ample reserves for the holiday seasons and are expected to boost large cap box office returns; advertising/media performance is likely to recover in line with consumer revival.