Guotai Junan Securities: The fifth batch of domestic game licenses issued, game companies' product development normalized

According to the financial news app Zhitong Finance, Guotai Junan Securities released a research report stating that with the issuance of the fifth batch of domestic game licenses in 2024, the rhythm of game companies' product launches is expected to become more stable. Against the backdrop of normalized license supply, optimism prevails on the policy front, and the gradual opening of product supply in the gaming market also reflects the continuous improvement in the operating pace of various companies. The team believes that the overall gaming industry is currently at a low valuation, and companies with rich and high-quality content reserves and solid fundamentals will be the first to recover.

Event: On May 20th, the official website of the National Press and Publication Administration released the approval information for domestic online games in May 2024, with a total of 96 games approved and 7 games with approval changes.

Stable number of licenses, KAIYING Network, G-bits, 37 Interactive, Century Huatong, and others have products listed. In the May batch of domestic game licenses, a total of 96 games were approved, the same as April (95 games), including 90 mobile products and 6 dual-end (mobile end plus client end) products. Specifically, approved products include KAIYING Network's "Bai Gong Ling," Century Huatong's "Ice Fire in the Arctic," G-bits' "Double City Combat: Reconstruction," 37 Interactive's "Four Seasons City and Domino," Shunwang Technology's "Jigu Party," Shengtian Network's "Mist Park," Alibaba's "Detective Chronicles," and others. Additionally, there are 7 games with approval changes, including Xindong Network's "Torchlight: Infinite" adding a client-side declaration.

Overall, the gaming industry's product planning and launches are progressing as scheduled.

Domestic game licenses are becoming normalized, the policy environment is conducive to industry development, and the product planning and launches of various game companies are progressing as scheduled. Recently, on May 20th, NetEase held its annual "520" game launch event, unveiling 12 new products, including titles like "Yan Yun Sixteen Sounds," "Marvel Ultimate Reversal," "Firefly Assault," with an increased proportion of "mobile + client" products and diversification in themes and genres, including VR product "Brave Fist Charge." On May 21st, Tencent's "Dungeon & Fighter: Origin" (DNF Mobile) was officially launched, becoming popular after opening, topping the domestic iOS free and bestseller charts on the same day. The PC version of "Dungeon & Fighter" was launched in China in 2008 and has accumulated a solid user base over more than ten years of operation.

Investment recommendation: With the normalization of license supply, we are optimistic about the policy front, and the gradual opening of product supply in the gaming market also reflects the continuous improvement in the operating pace of various companies. The overall gaming industry is currently at a low valuation, and we believe that companies with rich and high-quality content reserves and solid fundamentals will be the first to recover. We recommend KAIYING Network, with Tencent Holdings, NetEase, Giant Network, and Shenzhou Taiyue as beneficiaries; companies with leading advantages in game development, publishing, AI technology applications, etc., are also expected to gradually improve. We recommend G-bits, 37 Interactive, Perfect World, with Century Huatong, Xindong Company, Kingsoft, Zhejiang Wenyi, Youzu Network, and Zlongame as beneficiaries Risk Warning: Product launch revenue falls short of expectations, intensified industry competition leading to rising costs