The Zhitong Finance App learned that in the past three years, GF Securities released a research report saying that in the past three years, Internet growth has mainly been driven by internal factors: first, the strategy of focusing on the main business has made the long board longer, and the second is to consolidate infrastructure and improve efficiency, resulting in more sustainable revenue growth and increased operating leverage. On top of the continuous increase in cash flow and profits, shareholder returns are gradually increased. Looking ahead to 2025, the macroeconomic environment is expected to stabilize and improve, leading to economic development or becoming a positive external factor. Internet companies are beginning to look for new growth points. Unlike in the past, they simply contracted and cut costs; in the future, they may actively embrace new changes with reasonable investment. Business models continue to evolve and iterate, overseas, and AI.

Sub-sector trends

Social media: Traffic is highly sticky. In the game and advertising business, both Tencent and Bilibili performed better than the industry market in '25. We recommend following changes in Tencent's e-commerce (WeChat store) and generative AI implementation scenarios in '25. Bilibili, on the other hand, focuses on improving efficiency after profit, and the potential for advertising and games to go overseas.

Short video: Commercialization is leading the way, transitioning from high growth to steady growth. By consolidating e-commerce infrastructure and finding more new business opportunities, living locally, short dramas, and going overseas, future revenue and profit releases are likely to be more balanced.

Long video: Entering the creative platform period in 24 years, piracy and competition brought new challenges. 25 years focused on product innovation (subject innovation, form to short iterations), and potential positive changes brought about by ecological integration into short dramas.

Music streaming: Through operation and maintenance, driving the two-way optimization of membership size and ARPU, Spotify's commercialization has accelerated to catalyze industry investment and valuation. Both TME and NetEase Cloud Music have strong continuous growth potential.

IP+ pan-consumer products, represented by Bubble Mart, are flourishing overseas. For 25 years, we have been watching the progress of the North American market and the synergy of expanding into food and other categories. Read the paper on developments in IP derivatives, including business formats such as cards.

Local life: The growth rate has remained stable. The competitive pattern of in-store sales gradually stabilized in '24, and macroeconomic flexibility in '25 may drive the growth of the takeout and in-store sectors to accelerate. Continue to monitor the increase in overseas trips.

Investment advice

According to GF Securities, looking at current market capitalization and profit over 25 years, Internet PE is generally in the high single digit and low double digit range. From the perspective of long-term growth and dividend return of RMB assets, compared to the valuation cost ratio of global technology assets, Hong Kong stock Hang Seng Technology and China Securities currently have strong allocation value.

As a target of steady growth in value release, it is recommended to focus on social media leader Tencent Holdings (00700), music streaming media Tencent Music-SW (01698), and NetEase Cloud Music (09899). The growth model is steady, and profit margins are still expanding.

Looking at macroeconomic flexibility, it is recommended to focus on local life, e-commerce, or Meituan-W (03690), Kuaishou-W (01024), Bilibili W (09626), Weibo-SW (09898), etc. that are strongly linked to economic recovery, or that use advertising growth as the main profit support.

It is recommended to focus on Bubble Mart (09992) (North American market expansion and size expansion) and Baidu Group - SW (09888) (model iteration+acceleration of AI commercialization) for targets that have exceeded expectations from going overseas and brought about new changes in commercialization through technological iteration. Unlike the traffic business, content platforms have their own iterative cycle. NetEase (09999), iQiyi (IQ.US), and Mango Supermedia (300413.SZ), which are in a weak product cycle this year, are currently on the left. As the base is lowered, stronger product pipelines are released and catalyzed, which is expected to drive a recovery in valuation.

Risk warning

Increased regulation, consumption recovery falls short of expectations, and new business expansion falls short of anticipated risks.