CMGE and IGG successively announced their performance, with stock prices rising. Is this the rise of domestic games?

The explosive popularity of "Black Myth: Wukong" has raised expectations for the rise of domestic games. Recently, the gaming sector in the Hong Kong stock market has entered the earnings season, with many companies releasing their first-half financial reports, showing overall satisfactory performance.

On August 27th, CMGE (00302.HK) announced its first-half financial report for 2024, with a revenue of RMB 1.233 billion in the first half of the year, a year-on-year decrease of 19.7%.

The decline is mainly attributed to the soft revenue performance of games such as "One Piece: Bloodline Voyage" and "The Legend of the Condor Heroes: Iron Blood and Heart" which have been online for over two years. In addition, the heavyweight mobile game "Battle Through the Heavens: The Peak Showdown," authorized by China Literature (00772.HK) and published by CMGE, developed by Shenzhen Yifan, was launched on all platforms in June this year, with its main contribution to performance expected in the second half of the year.

In the first half of the year, CMGE adjusted its net loss to RMB 208 million, turning from profit to loss year-on-year. The main reasons for the loss are the provision of impairment of investments, impairment of prepayments for games and IP that have not yet been launched or whose contracts have expired, and other non-operating expenses incurred. Excluding these factors, the company achieved a profit from its operating business in the first half of the year.

It is worth noting that in the second half of 2024, CMGE will launch several new games, such as "Douluo Continent: Time Reversal" expected to be launched in September this year; the company's strategic product "Chinese Paladin World" has started pre-order activities, with pre-order numbers expected to exceed 10 million before the game's launch, which is about to undergo its fourth round of closed beta testing and is planned to be officially launched within 2024.

Some analysts predict that CMGE's multiple games are entering a harvest period, which may bring considerable revenue in the future, leading to an improvement in the company's operating performance in the second half of the year.

As of the end of August 29th, CMGE opened low and rose high, up by 2.86% to HKD 0.72 per share, with a market value of HKD 2.054 billion.

Another well-known gaming company, IGG, also released its first-half financial report for 2024 yesterday, recording a revenue of HKD 2.735 billion in the first half of the year, a year-on-year increase of approximately 9.5%.

Splitting it down, IGG's flagship game "Lords Mobile" is showing a declining trend, but its APP business performance is impressive. Two heavyweight strategy games, "Doomsday: Last Survivors" and "Viking Rise," have become new drivers of revenue growth, succeeding "Lords Mobile."

In the first half of the year, the company achieved a net profit attributable to equity holders of HKD 331 million, turning from loss to profit year-on-year. The company's adjusted net income was approximately HKD 347 million, compared to an adjusted net loss of approximately HKD 334 million in the same period last year.

IGG also stated that the company embraces AIGC technology, actively reducing costs and increasing efficiency. With the increased promotion of "Viking Rise" and the continuous rise of the APP business, the dual-drive of IGG is expected to break through with an upward trend in revenue, and the company's business is expected to achieve long-term stable profitability As of August 29th, IGG surged by 22.18% to HKD 3.25 per share, with a market value of HKD 3.816 billion.

Alongside the performance announcement, IGG also declared a mid-term dividend of HKD 8.5 cents per share, resulting in a dividend yield of approximately 2.6% based on the current stock price. The company's generous dividend distribution reflects management's confidence in future development.

Previously, Zulong Entertainment (09990.HK) disclosed that it achieved a revenue of RMB 4.39 billion in the first half of the year, representing a 9.2% year-on-year growth, with a significant reduction in adjusted losses during the same period. Overall, the performance of Hong Kong-listed gaming companies is commendable, showing signs of recovery.

Data indicates that in the first half of 2024, China's actual gaming market sales revenue reached RMB 147.267 billion, a 2.08% year-on-year increase. During the same period, Chinese independently developed games generated overseas sales revenue of USD 8.554 billion, marking a 4.24% year-on-year growth. Chinese gaming enterprises continue to implement their overseas expansion strategies, aiming for deeper development in the broader global market.

Since its launch on August 20th this year, the domestic AAA game "Black Myth: Wukong" has not only broken numerous records held by previous domestic standalone games but has also entered the ranks of the world's top games.

Industry insiders suggest that against the backdrop of normalized game approvals, the recovery trend in the gaming industry persists, especially with the continuous rise of high-quality domestic games. The progress of related overseas expansion efforts is also expected to exceed expectations.

Furthermore, some analysts point out that the overall gaming sector is currently undervalued. Companies with rich and high-quality content reserves and solid fundamentals are expected to recover first. Gaming companies listed with abundant IP resources are poised to unleash a new wave of value