WanLian Security: The overall performance of the media industry in H1 2025 is improving, with the gaming sector performing exceptionally well

According to the Zhitong Finance APP, WanLian Securities released a research report stating that in the first half of 2025, the media industry's operating revenue is expected to grow from 2.47% in the first half of 2024 to 3.86%, with total revenue reaching 254.856 billion yuan. The net profit attributable to shareholders is also expected to rebound, increasing by 28.85% year-on-year to 21.780 billion yuan, indicating an overall improvement in performance. The performance of the industry’s sub-sectors shows some differentiation, with the gaming sector expected to see a significant rebound in Q2 2025. From a medium to long-term perspective, as content supply gradually recovers, the deepening of technologies such as AI, combined with policy support and expectations of consumer recovery, the industry's prosperity is expected to be restored. It is recommended to pay attention to companies in the film and television theater and gaming sectors that show strong performance, as well as companies that are laying out digital assets and applying AIGC-related technologies.

WanLian Securities' main viewpoints are as follows:

The media industry's performance is improving in H1 2025, with a significant year-on-year rebound in Q2 2025 performance.

On the revenue side, the media industry's operating revenue in H1 2025 is expected to grow from 2.47% in H1 2024 to 3.86%, with total revenue reaching 254.856 billion yuan. The net profit attributable to shareholders is also expected to rebound, increasing by 28.85% year-on-year to 21.780 billion yuan, indicating an overall improvement in performance. The gross profit margin remains stable, rising by 0.84 percentage points to 32.90%; on the expense side, the management expense ratio is relatively stable, while the sales expense ratio continues to rise to 13.26%, and the net profit margin increases by 1.64 percentage points year-on-year to 8.65%.

In terms of year-on-year comparison by quarter, the overall operating revenue of the media industry in Q2 2025 is expected to grow by 2.53% year-on-year to 129.030 billion yuan. The net profit attributable to shareholders is expected to increase significantly by 20.31% year-on-year to 10.703 billion yuan; in terms of quarter-on-quarter comparison, the overall operating revenue of the media industry in Q2 2025 is expected to rise by 2.55%, while the net profit attributable to shareholders remains stable, in line with cyclical trends.

Gaming Sector

Revenue expands in H1 2025, net profit attributable to shareholders rebounds from the bottom. In H1 2025, the gaming sector achieved revenue of 54.452 billion yuan, a year-on-year increase of 22.17%, continuing to expand its growth trend. The net profit attributable to shareholders rebounded from the bottom, rising by 74.95% to 8.052 billion yuan. The increase in profits is mainly due to leading companies in the sector, such as ST Huatong and PWRD, continuing to deepen their core product operations and self-developed IP iterations during this period. Additionally, the contribution from hit games and the impact of new game version updates led to a significant increase in revenue scale. Companies like BINGCHUAN have also significantly reduced sales expenses through cost-cutting and efficiency-enhancing strategies, which has strengthened the overall profitability of the gaming sector in H1 2025. The gross profit margin and net profit margin increased by 0.37 percentage points and 4.13 percentage points to 67.80% and 14.74%, respectively.

Significant revenue growth in Q2 2025, net profit attributable to shareholders stops declining and rebounds. In Q2 2025, the gaming sector achieved revenue of 27.733 billion yuan, a year-on-year increase of 22.41%. The net profit attributable to shareholders stopped declining and rebounded, soaring by 104.47% year-on-year to 4.569 billion yuan, with ST Huatong's games performing exceptionally well, contributing significantly to the gaming sector's performance rebound in Q2 2025. In terms of profitability, the gross profit margin slightly increased by 2.25 percentage points to 68.55%, and the net profit margin rebounded by 6.80 percentage points to 16.38% Film and Television Theater Sector

Revenue and net profit attributable to the parent company rebounded in H1 2025. The film market performed relatively well in H1 2025, with the film and television theater sector achieving revenue of 19.689 billion yuan, a year-on-year increase of 15.24%. The net profit attributable to the parent company rebounded, increasing by 767 million yuan to a profit of 1.776 billion yuan, mainly due to the excellent box office performance of the blockbuster film "Ne Zha" by Light Media in Q1, significantly boosting the company's performance and driving the sector's rebound; gross margin and net margin increased by 0.82 percentage points and 3.49 percentage points to 28.94% and 8.98%, respectively.

Revenue declined year-on-year in Q2 2025, and net profit attributable to the parent company expanded losses. In Q2 2025, the film and television theater sector's revenue decreased by 21.50% year-on-year to 5.573 billion yuan, and the net profit attributable to the parent company fell to -592 million yuan, continuing the downward trend. From the company's perspective, compared to Q1, there was a lack of major and mid-tier productions in Q2, and the overall box office performance was below expectations, leading to declines in both revenue and profit. In terms of profitability, the gross margin fell by 2.76 percentage points to 18.18%, and the net margin continued to decline, decreasing by 5.79 percentage points year-on-year to -11.24%.

Digital Media Sector

Stable revenue in H1 2025, with a decline in net profit attributable to the parent company. In H1 2025, the digital media sector achieved revenue of 11.938 billion yuan, a year-on-year decrease of 4.06%. The net profit attributable to the parent company was 768 million yuan, a significant year-on-year decline of 27.39%. The main reason was that nearly 70% of the companies in the sector saw a year-on-year decrease in net profit attributable to the parent company. In terms of profitability, the gross margin and net margin fell by 0.72 percentage points and 1.86 percentage points to 35.98% and 6.51%, respectively.

Both revenue and net profit attributable to the parent company faced pressure in Q2 2025. In Q2 2025, the digital media sector achieved revenue of 6.396 billion yuan, a year-on-year decline of 3.60%. The net profit attributable to the parent company was 402 million yuan, a year-on-year decrease of 40.37%. In terms of profitability, the gross margin increased by 0.45 percentage points year-on-year to 37.19%, while the net margin decreased by 3.69 percentage points year-on-year to 6.39%.

Advertising and Marketing Sector

Revenue continued to recover in H1 2025, with a slight decline in net profit attributable to the parent company. In H1 2025, the advertising and marketing sector achieved revenue of 83.854 billion yuan, a year-on-year increase of 4.44%, while the net profit attributable to the parent company decreased by 4.20% year-on-year to 2.985 billion yuan. In terms of profitability, the gross margin fell by 0.87 percentage points to 11.55%, and the net margin decreased by 0.31 percentage points year-on-year to 3.58%.

Revenue growth in Q2 2025, with a decline in net profit attributable to the parent company. In Q2 2025, the advertising and marketing sector achieved revenue of 45.222 billion yuan, a year-on-year increase of 11.06%. The net profit attributable to the parent company decreased by 14.50% to 1.484 billion yuan. In terms of profitability, the gross margin continued to decline, falling by 1.26 percentage points year-on-year to 11.38%, and the net margin also decreased by 0.99 percentage points year-on-year to 3.32% Broadcasting and Television Sector

Revenue continued to decline in H1 2025, and net profit attributable to the parent company further expanded its losses. In H1 2025, the broadcasting and television sector achieved revenue of 20.847 billion yuan, a year-on-year decrease of 0.83%, with a net profit attributable to the parent company of -213 million yuan. Most companies in the sector performed poorly, with losses further expanding. Among them, GuiGuang Network in H1 2025 faced stagnant accounts receivable turnover and amplified credit impairment losses, leading to a further expansion of net profit losses to over 500 million yuan. In terms of profitability, the gross profit margin rose by 0.16 percentage points to 24.30%, while the net profit margin declined by 0.45 percentage points to -0.67%.

In Q2 2025, operating revenue and net profit attributable to the parent company remained in a downward range year-on-year, but the decline has slowed. In Q2 2025, the broadcasting and television sector achieved revenue of 11.055 billion yuan, a year-on-year decrease of 0.01%, with a net profit attributable to the parent company still in loss at -125 million yuan, showing a slowdown in the decline. In terms of profitability, the gross profit margin rose by 1.46% to 24.57%, while the net profit margin declined by 0.54 percentage points to -0.59%.

Publishing Sector

Revenue declined in H1 2025, while net profit attributable to the parent company rebounded. In H1 2025, the publishing sector achieved revenue of 64.076 billion yuan, a year-on-year decrease of 8.44%. The net profit attributable to the parent company was 8.412 billion yuan, a year-on-year increase of 16.33%, with most companies in the sub-sector performing well in terms of net profit. In terms of profitability, the gross profit margin remained stable, slightly increasing by 0.04 percentage points to 34.64%, while the net profit margin rose by 2.85 percentage points to 13.44%.

In Q2 2025, operating revenue declined, but net profit attributable to the parent company stopped falling and rebounded. In Q2 2025, the publishing sector achieved revenue of 33.051 billion yuan, a year-on-year decrease of 12.29%. The net profit attributable to the parent company stopped falling and rebounded, increasing by 6.76% year-on-year to 4.964 billion yuan. In terms of profitability, the gross profit margin slightly decreased by 0.54 percentage points year-on-year to 35.27%, while the net profit margin increased by 2.75 percentage points year-on-year to 15.47%.

Risk Factors

Changes in the policy environment; consumer recovery not meeting expectations; intensified market competition; innovation technology application not meeting expectations; goodwill impairment risk