According to the Securities Times app, Tianfeng Securities released a research report stating that third-quarter reports are gradually being released. In terms of AI, Zhifu AI launched its autonomous intelligent entity AutoGLM, while overseas OpenAI released its strongest model o1. The competition in AI applications continues to be intense, focusing on investment opportunities in large AI models and related high-quality algorithmic data. In the merger and acquisition field, on September 24th, Chairman of the China Securities Regulatory Commission Wu Qing announced the upcoming "Six Mergers and Acquisitions Measures." In the gaming sector, Beijing Ultral Power Software (300002.SZ) and Kingnet Network (002517.SZ) showed significant performance growth, anticipating an improvement in the fundamentals of the gaming sector in the fourth quarter.

Tianfeng Securities' main points are as follows:

This week (October 28 to November 1, 2024), the Shenwanchuanmei Index dropped by 2.77%, ranking 26th in the sector, while during the same period the SSE Composite Index fell by 0.84% and the CHINEXT Price Index dropped by 5.14%. This week, the gaming sector decreased by 3.68%, the movie theater line dropped by 2.45%, advertising marketing decreased by 2.4%, publishing dropped by 7.32%, and TVB rose by 7.61%.

In the AI sector, Zhifu AI introduced its autonomous intelligent entity AutoGLM, while overseas OpenAI released its most powerful model, o1. The competition in AI applications remains intense, focusing on investment opportunities in large AI models and related high-quality algorithms. It is recommended to pay attention to companies related to the content side of the industry chain: Hunan TV & Broadcast Intermediary (000917.SZ), where its subsidiary Dachen Venture Capital is a shareholder of Zhifu Huazhang; DOSHINE Education (300010.SZ) has a strategic cooperation with Beijing Zhifu Huazhang; and Visual China Group (000681.SZ) currently owns over 30 million audio and video materials.

Regarding mergers and acquisitions, on September 24th, Chairman of the China Securities Regulatory Commission Wu Qing announced the upcoming "Six Mergers and Acquisitions Measures." On the same evening, the commission released the 'Opinions on Deepening Reform in the Market of Mergers and Acquisitions of Listed Companies.' The 'Six Mergers and Acquisitions Measures' mainly include vigorously supporting the transformation and upgrading of listed companies towards new quality productivity, and encouraging listed companies to strengthen industrial integration. It is recommended to pay attention to Shanghai Film, Zhejiang Talent Television and Film, TVZone Media, Guomai Culture, Ciwen Media Co., Ltd., Hunan TV & Broadcast Intermediary, and Qitian Technology Group.

In the gaming sector, Beijing Ultral Power Software and Kingnet Network achieved significant performance growth in the third quarter of 2024, anticipating an improvement in the fundamentals of the gaming sector in the fourth quarter.

Industry Trends: The performance of game companies in the third quarter showed some differentiation. Beijing Ultrapower Software's 3Q24 revenue increased by +5% year-on-year, net income attributable to the mother increased by +191% year-on-year, and non-net income attributable to the mother increased by +39% year-on-year. Kingnet Network's 3Q24 revenue increased by +30.33% year-on-year, net income attributable to the mother increased by +32% year-on-year, and non-net income attributable to the mother increased by +33% year-on-year.

Ranking Tracking: According to the Qimai data IOS game bestseller list rankings, this week (2024/10/27-2024/11/2, the same below), Tencent's "King of Glory", "Peace Elite", and "Castle & Warriors: Origin" maintained the TOP3 rankings most of the time ("Arknights" surged into the TOP3 bestseller list on November 1 to 2); "Gold Shovel Battle" ranked in the TOP4-7 range; "League of Legends Mobile" ranked in the TOP7-11. Netease's "Hearthstone" ranked high up to TOP4 on October 30, then gradually fell back, and "Fantasy Westward Journey" ranked in the TOP7-12 range this week. Dot Family Interactive's "Endless Winter" ranked in the TOP4-6 range this week.

Industry Insights: From the positive reviews and high number of monthly approvals of the game "Black Myth: Wu Kong" by mainstream media, it is evident that there is clear policy support for the gaming industry. Coupled with further efforts in domestic stable growth policies, some markets may see a reversal of concerns about the resilience of gaming user consumption. The gaming sector has a relatively solid foundation for valuation repair. The bank believes that A-share game developers have rich product reserves, and starting from September, the competitive pressure on their mature games will diminish marginally, while the window for new game releases will also significantly improve. Therefore, it is expected that the performance of the gaming sector will enter an upward channel in the fourth quarter. Recommendations include: Beijing Ultrapower Software (joint coverage with the computer sector), Kingnet Network, Shanghai Yaoji Technology (joint coverage with light industry textiles), G-bits Network, Giant Network.

Regarding IP derivatives, according to a Zhishi Consulting report, the market size of China's collectible card industry has increased from 0.7 billion yuan in 2017 to 12.2 billion yuan in 2022, and is expected to grow rapidly to 31 billion yuan by 2027 with a compound annual growth rate of 20.6%. In this rapidly growing market, in 2022, card games held a 71% market share ahead of other companies. Focus on companies involved in IP card games and related layouts. Follow the landing situation of card game companies on the Hong Kong stock market. Recommendations include: Shanghai Yaoji Technology (joint coverage with light industry textiles), Alpha Group, Shanghai Film.

In terms of movies, each film showed strong explosive power over the weekend, with the market soaring by 97.2% on Saturday, and the national single-day box office rising above 0.14 billion, nearly 25% higher than the same period last year when "The Rescue" debuted as the champion. As of November 2, the total box office for 2024 has exceeded 38.6 billion. "Venom: Let There Be Carnage" grew by 122.7% compared to the previous Friday, with a single-day box office reaching around 50.3 million, and the total box office surpassing the 0.47 billion mark after 11 days of release. "Incendies" nearly doubled its growth on the first Friday, showing excellent performance for a new film, with a single-day box office soaring to nearly 30 million, and the total box office breaking 60 million after two days of release plus previews. "The Worries of Qiaoyan" rose by 74.2% on Friday, with a daily box office rebounding to over 11 million, and the comprehensive total box office exceeding 0.12 billion after eight days of release.

As of now, a total of 28 films have been scheduled for the New Year's film season, including "Love You, Love Lies" (Maoyan Entertainment, China Ruyi, Wanda Film Holding are the top three production companies), "Crayon Shin-chan: Our Dinosaur Diary", "Ocean Odyssey 2", and others. Policy benefits are gradually landing coupled with orderly supply release, which is expected to stimulate potential market demand, focusing on the improvement of Q4 operating conditions for media companies. By upgrading refined supply to meet diverse film consumption demands, the release of supply is expected to stimulate potential market demand, driving overall box office growth. Recommendations include: Shanghai Film (601595.SH) announced the scheduling of the film "Myth of Love" parallel film "Good Things" on November 22, potentially contributing to performance flexibility. Focus on the progress of industrial integration of listed companies under the six merger guidelines. With the warming of movie supply and consumption subsidies under Maoyan Entertainment, Q4 box office is expected to achieve a year-on-year increase. Wanda Film Holding (002793.SZ) is expected to enhance cinema concentration and synergize content sector transformation under the recovery of the overall market.

Risk Warning: Subsequent game online revenue falls short of expectations; Domestic epidemic recurrence risk; Slowdown in domestic economic growth; Inadequate effect of policy stimulus.