Zhongyuan Securities: Significant profit growth in the media sector in H1 2025, continuing to be optimistic about sub-sector directions such as games, publishing, and IP derivatives

According to the Zhitong Finance APP, Zhongyuan Securities has released a research report stating that the semi-annual report for the media sector has been published, with the sector's operating scale reaching a new high in H1 2025 and significant profit growth. The performance of sub-sectors is differentiated, with the gaming sector showing good performance growth; the film and television sector saw significant performance growth in the first half of the year, but mainly driven by Q1, with Q2 performance under pressure; the publishing sector's revenue declined due to changes in the subscription method for educational materials and a contraction in demand for general books, but profits increased significantly due to tax policy impacts; the advertising and marketing sector experienced steady revenue growth, but profits were greatly affected by the non-recurring gains and losses of individual stocks. The firm remains optimistic about the gaming, publishing, and IP derivative sectors.

Zhongyuan Securities' main viewpoints are as follows:

Gaming: Resonance of fundamentals and policies, AI expected to boost valuations

Currently, the gaming industry's market prosperity is high, with an increase in user ARPU driving steady market growth. Policies such as "Several Policy Measures to Expand Service Consumption" and "Guiding Opinions on Vigorously Developing Digital Consumption to Create a Better Life in the Digital Age" are favorable for industry development. At the listed company level, the A-share gaming sector's operating revenue grew nearly 24% year-on-year, and net profit attributable to the parent company increased nearly 75% year-on-year, with significant growth in revenue and profit reaching historical highs for the same period. The expense ratio has decreased, and profit margins have improved significantly. The product cycle of gaming companies strongly drives performance, and under long-term trends, performance shows sustainability. Additionally, the multi-modal capabilities of AI significantly contribute to cost reduction and efficiency improvement for gaming companies, with the overall R&D expense ratio in the industry declining from 11.02% in H1 2024 to 9.01%. As one of the core application scenarios of AI, there is still much room for innovation in gameplay for future gaming products, leading to dual improvements in profitability and valuation. It is recommended to pay attention to the product cycles, performance, and new product reserves of gaming companies.

IP Derivatives: Rise of the cultural new consumption market

In the development process of moving from material scarcity to spiritual abundance in China, the main consumer groups are changing across generations, with "post-90s," "Generation Z," and "post-00s" gradually becoming the core consumer groups and forming different consumption concepts from the previous generation. Factors such as emotional consumption, social currency, and collecting hobbies drive consumer spending and repurchase, leading to sustained market demand growth. Meanwhile, the maturity of the IP licensing commercialization system, combined with the cost and stability advantages of domestic manufacturing supply chains and the amplification of IP influence through internet dissemination, will drive a robust supply and demand for the IP derivatives market. Several content companies have begun to transform or explore IP derivative businesses to optimize revenue structures and enhance profitability.

Publishing: Steady demand for textbooks and educational materials, high dividend stocks offer excellent long-term returns

The overall performance of the publishing sector is stable, with good profit quality and low valuations. It is recommended to focus on state-owned publishing companies with low valuations, high dividends, and high yields, which can provide long-term stable returns through high dividends and low volatility. Some companies have an average dividend yield of over 5% in the past three years, offering defensive allocation value. Additionally, several state-owned publishing companies are advancing digital transformation based on technologies such as AI, exploring the possibilities of new business models to improve performance elasticity Film and Television: Q3 Demand Marginally Rebounds

Although the film market performed poorly in Q2, putting pressure on the film and television sector's performance, demand began to recover marginally in Q3 with the release of summer blockbusters. The box office for the summer season in 2025 showed a slight increase compared to the summer season in 2024, and box office revenue continued to grow in September. With the National Day holiday approaching in October, the current lineup of films is relatively rich, which is expected to further drive the rebound in viewing demand. Some film and television content companies are exploring derivative businesses based on their own IPs to break free from a single reliance on box office revenue, broaden the commercialization paths of their content, and reduce performance volatility risks. In addition, the improvement of regulatory policies under the "21 Regulations of the State Administration of Radio and Television" regarding the creation of film and television content, content introduction, and production and broadcasting models can further enhance the attractiveness of domestic film and television content and optimize the profitability of film and television companies.

Recommended Focus: KINGNET, PWRD, SANQI HUYU, G-bits, Zhongyuan Media, Wanda Film, Light Media, Focus Media, Mango Super Media.

Risk Warning: Policy effects may be less than expected; market competition may intensify; content product quality may fall short of expectations; AI technology progress and application effects may be less than expected; regulatory policy changes in certain areas