GF Securities: Game version number released in August, Meta increases AI investment for 24 years

According to the financial news app Zhitong Finance, GF Securities released a research report stating that in August, the issuance of imported game licenses and a slight rebound in the A-share media sector were mainly due to the low valuation of the sector in the previous period, with more catalytic effects from the AI-related industry recently: Meta (META.US) released its FY24Q2 financial report this week, raising its AI investment expectations for 24 years, bringing a boost to the overall sector.

This week, the CITIC Media sector rose by 2.15%, outperforming the Shanghai Composite Index by 1.65 percentage points. The A-share media sector saw a slight rebound this week, mainly due to the low valuation of the sector in the previous period and more catalytic effects from the AI-related industry recently: OpenAI began testing the long output version of GPT-4o; Meta released its FY24Q2 financial report this week, raised its AI investment expectations for 24 years, and launched AIStudio, an AI character generation tool, and SAM2, an image and video editing tool this week, thereby boosting the overall sector. Looking ahead, we recommend focusing on two main themes: first, select sectors and high-quality companies with good performance. After the performance is verified, it is expected to support a steady increase in valuation. Key areas to focus on include the internet, gaming, long videos, marketing, and other sectors. Second, continuously monitor the marginal changes in AI applications within the sector, which may enhance market expectations for the implementation of AI applications. It is recommended to pay attention to companies with AI product or technology layouts that are actively advancing implementation. Additionally, it is important to focus on companies with sufficient cash on hand, attractive dividend yields, and actively expanding into new businesses or with expectations for new business layouts.

Investment Advice: We recommend focusing on the dual recovery opportunities of platform economy performance and valuation, as well as opportunities in AI+ and the digital economy. (1) In the internet sector, we recommend focusing on: Tencent Holdings, Meituan (UE optimization brought about by stable offline patterns), Kuaishou (factors such as profit release exceeding expectations), Pop Mart (performance forecast exceeding expectations), as well as iQIYI, Mango Super Media, Tencent Music, and Cloud Music in the stable and profit-optimized streaming media sector. (2) In gaming, the market is advised to focus on leading companies with excellent performance and quality product reserves, such as Kaiying Network and Shenzhou Taiyue; focus on Shengtian Network, which combines social business with AI deeply; focus on companies with quality product reserves in the sector such as Perfect World. Also, pay attention to undervalued gaming leaders like 37 Interactive Entertainment and Giant Network. (3) Focus on the value restoration of sector leaders and outstanding stocks, the marketing sector recommends Focus Media (strong performance resilience, high dividends); for long videos, focus on Mango Super Media and iQIYI; for online recruitment, focus on BOSS Zhipin; for online travel, focus on Didi, Manbang, etc.; for offline entertainment, focus on Huali Technology; the gambling sector continues to recover post-pandemic, focus on Sands China, etc.; for cultural tourism, focus on Electric Media, etc. (4) In education, focus on AI+ education, digital education, vocational education, and education and training directions. It is recommended to pay attention to related stocks such as New Oriental, Jiafa Education, Shengtong Shares, as well as state-owned publishing companies like Zhongyuan Media, Phoenix Media, Southern Media, and Wanxin Media. Also, focus on stocks with the potential for continued recovery and growth such as Fenbi (increased market share in public examinations) and Gaotu Group (stable regulatory environment, expanding non-disciplinary training and offline presence). (5) In the film and television sector, focus on summer box office hits and the empowerment of the film and television industry by AI technology. Pay attention to companies like Enlight Media, Hengdian Studios, Maoyan Entertainment, Huace Film & TV, and Wanda Film (6) In the AI+ direction, large models with multi-modal capabilities continue to evolve. With the continuous improvement of model capabilities and the reduction of access costs, the application side may prosper. It is recommended to continue to focus on targets with logical sequence and realization.

(7) Regarding the logic of going global, pay attention to internet, gaming, content going global, as well as related marketing service providers.

Risk Warning: Sector systemic risk, policy and regulatory risk, technical risk for gaming companies