The Zhitong Finance App learned that Cinda Securities released a research report saying that in February, domestic game versions were announced, and a total of 111 products were approved. The number stabilized at 100+, and the normalization of version numbers progressed smoothly; in addition, version information updates for 5 products were also announced. The pace of “normalization+vigour” approval of the version number is expected to significantly improve the profitability of game companies, and also inject strength into supply-side improvements in the game industry and even the fundamental development of the game industry, thus leading the game industry towards a new round of development cycle. It can be seen from this that the policy encourages the healthy development of the game industry.

The bank pointed out that the valuation center of the A-share game industry in 24 years is currently about 20x. Game management measures are expected to be implemented in March. Suggestions focus on: (1) improving 24Q1 performance expectations: Kaiying Network (002517.SZ), etc.; (2) stable fundamentals: 37 Entertainment (002555.SZ), etc.; (3) AI application empowerment: Zitian Technology (300280.SZ), etc.; (4) MR layout: Baotong Technology (300031.SZ), etc.; (5) Hong Kong stocks: Tencent Holdings (00700), etc.; (6) Others: Xinghui Entertainment (300043.SZ), etc..

Cinda Securities's views are as follows:

Incidents:

On February 27, the State Press and Publication Administration released the February review game version numbers, with a total of 111 games.

Comment:

Domestic game versions were announced in February, and a total of 111 products were approved. The number stabilized at 100+, and the normalization of versions progressed smoothly; in addition, version information updates for 5 products were also announced. In terms of application categories, in the new version, there are 4 mobile and client-side games, 40 mobile games, 5 mobile games, 5 mobile games, 1 three-terminal mobile, PC, and console models, and 61 mobile and web games. These include: Tencent's “Wild Origins”; NetEase's “Operation Apocalypse”; Zen Tour Technology's “Stickman Ranger”; Reading Group's “Dabong Fight More People”; Perfect World “Perfect New World”; game science “Black Myths: Goku”; and “Infinite Warmth” by folding paper. Also, in the game approval changes, NetEase's “Eternity” received a mobile version, and Chongqing Pasya Technology's “Portia Time” added mobile and clients.

Domestic game versions have surpassed 100 for three consecutive months, and the policy encourages the healthy development of the game industry.

According to the State Press and Publication Administration, domestic online game editions of 89/87/87/105/115/111 were distributed respectively from September 2023 to February of the following year (594 in total). The number remained high since the edition resumed distribution, and this year it has stabilized above 100 digits. Furthermore, in terms of imported versions, the game is encouraged by policies to go overseas. In December 2023, the list of the last batch of imported online game versions of the year was announced. A total of 40 products passed the review; in February 2024, the list of the first batch of imported online game versions of this year was announced, with a total of 32 products passing the review. The pace of “normalization+vigour” approval of the version number is expected to significantly improve the profitability of game companies, and also inject strength into supply-side improvements in the game industry and even the fundamental development of the game industry, thus leading the game industry towards a new round of development cycle. It can be seen from this that the policy encourages the healthy development of the game industry.

AI progresses rapidly and iterates rapidly. Wensheng Video ushered in an important inflection point in 2024, and the game industry is expected to benefit.

Genie (Google), launched in 2023, can generate interactive environments using images or text, and create 2D platform-based games through game videos and simple prompts. Subsequent AI-3D algorithm iterations are expected to transform the game industry. Furthermore, the GDC Conference will be held on March 18-22, 2024 in San Francisco, USA. As one of the largest gaming events in the world, it is expected to see highlights such as the modernization and application of generative AI in games.

Investment advice:

The valuation center of the A-share game industry in 24 years is currently around 20x. The game management method is expected to be implemented in March. The suggestions focus on: (1) 24Q1 performance expectations: Kaiying Network, Perfect World, Giant Network; (2) Stable fundamentals: 37 Entertainment, Shenzhou Taiyue, Gibbit; (3) AI application empowerment: Zitian Technology, Changqu Technology, Shengtian Network; (4) MR layout: Baotong Technology, Mingchen Health; (5) Hong Kong stocks: Tencent Holdings, NetEase - S, Zhongxu Future; (6) Others: Xinghui Entertainment, Yaoji Technology, Youzu Network Glacier Network, etc.

Risk Factors:

Policies and regulations are becoming stricter, the pace of game version distribution and product launch falls short of expectations, and progress in AIGC technology development and commercialization falls short of expectations.