CICC Securities: Domestic gaming market continued to grow in September, focusing on the new game cycle to drive industry growth

According to the Zhitong Finance and Economics APP, Changjiang Securities released a research report stating that the domestic gaming market continues to grow, with the scale of the Chinese gaming market in Q3 24 reaching 91.766 billion yuan (up 8.95% year-on-year). The scale of the Q3 gaming market reached a historical high, with September reaching 30.3 billion yuan (up 15% year-on-year). The current valuation of the gaming sector still has upward elasticity, with stable policy expectations and gaming companies entering a new game cycle. The gaming sector is expected to achieve valuation repair and fundamental improvement. It is recommended to pay attention to investment opportunities related to the gaming sector. Related targets: Tencent (00700), NetEase-S (09999), 37 Interactive Entertainment (002555.SZ), G-bits (603444.SH), Giant Network (002558.SZ), Krypton Network (002517.SZ), Shenzhou Taiyue (300002.SZ).

Main points of Changjiang Securities are as follows:

Domestic gaming market maintains growth momentum, Q3 gaming market reaches historical high

According to Gamma Data, the scale of the Chinese gaming market in Q3 24 was 91.766 billion yuan (up 22.96% quarter-on-quarter, 8.95% year-on-year). In September, the scale of the Chinese gaming market was 30.3 billion yuan, with a quarter-on-quarter decline of 9.85% due to seasonal factors at the end of the summer, but still achieving nearly 15% growth year-on-year. The Chinese gaming market has broken the 300 billion mark for two consecutive months in Q3 24, the first time in nearly three years.

The standalone console market in Q3 24 achieved tens of billions of yuan in incremental sales due to factors such as the sales boost of "Black Myth: Wukong". New games such as NetEase's "Endless Rebirth Mobile Game", MiHaYo's "Zero Zone", and Lilith's "Sword and Expedition: Setting Sail" all estimated first-month revenue exceeding 500 million yuan. Coupled with incremental games like "DNF Mobile Game", the mobile game market in Q3 24 continued to grow positively compared to the high base of Q3 23 (65.658 billion, up 20.20% quarter-on-quarter, 1.21% year-on-year; with September reaching 22 billion, down 2.22% quarter-on-quarter, up 10.48% year-on-year). The logic of quality content supply driving gaming demand improvement and market growth has been validated.

Self-developed games going global have performed well, and the global gaming market still has high vitality

Benefiting from the strong performance of new games such as "Zero Zone" and the outstanding performance of "Black Myth: Wukong", the revenue from Chinese self-developed games going global in July, August, and September 2024 all exceeded 1.5 billion US dollars (year-on-year increase of 5.31%, 25.08%, 33.88% respectively).

According to Sensor Tower, in September, a total of 35 Chinese companies entered the top 100 global mobile game publishers' revenue list, with a total revenue of 1.91 billion US dollars, accounting for 36.0% of the revenue of the top 100 global mobile game publishers in this period. Tencent, NetEase, MiHaYo, DianDian Interactive, 37 Interactive Entertainment, Shell Wood Games, etc., ranked among the top 30 Chinese mobile game publishers in terms of revenue (calculated by global AppStore+Google Play, excluding third-party Android channels in China). DianDian Interactive's "Whiteout Survival", Shell Wood Games' "Age of Origins", and 37 Interactive Entertainment's "Puzzles & Survival" still maintain their positions in the top 10 of Chinese gaming companies in terms of global revenue The overseas expansion of the gaming industry still remains a promising track with room for imagination.

Listed gaming companies launch new game products in succession

Recently, multiple game products from listed gaming companies have been launched. According to Gravity Engine, 37 Interactive's "Time Grocery Store" mini-game has been steadily in the Top 5 of the mini-game bestseller list since its launch at the end of September; G-bits' "Fantasy World of Gods" entered the Top 10 of the iOS game free list after its launch on October 18, while Kaiying Network's "Rainbow Orange" entered the Top 5 of the iOS game free list after starting public testing on the 20th.

Looking ahead, major game developers have rich reserves. Giant Network's "King's Expedition" was launched on all platforms on October 24, and its mini-game version has remained in the Top 10 of the WeChat mini-game bestseller list for months. Kaiying Network's "Tomb Notes: Setting Off" started its first test on September 19, while "Douluo Continent: Legend of the Evil" completed its first round of testing in mid-October and has officially started pre-registration for subsequent launches. G-bits' "Sword of Inquiry (Code M72)" and "Staff Sword Legend (Code M88)" conducted their first paid tests from August to September and are planned to be launched in the first half of 2025. Shenzhou Taiyue's "Dreamland" and "Code LOA," two SLG products combining simulation and management, are expected to be launched within the year. Tencent, NetEase, and other leading game developers also have multiple products scheduled for launch this year. Pay attention to the performance flexibility brought by the successive launches of new games.

Risk Warning: Risks include delays in game product approval, launch progress, and performance below expectations; as well as industry regulatory risks