Open-source securities: The trading card system meets the diverse needs of users. With both quantity and price rising, the market size may continue to grow rapidly.

Open Source Securities released a research report, stating that the market size of collectible card games may continue to grow under the driving force of increasing volume and price. According to Wisdom Consulting, the market size of collectible card games in China increased from 700 million yuan in 2017 to 12.2 billion yuan in 2022, with a CAGR of 78.4%, and is expected to reach 31 billion yuan by 2027. In terms of competition, the top five companies in the card game industry accounted for a total market share of 76.7% in 2022, with the market share of the leading card game company being 71.0%, indicating a high industry concentration. However, online emerging brands are flourishing, and the competition landscape is expected to become more open. The card production supply chain is mature, the categories are biased towards light, and high-quality IP resources may become a core competitive factor, with content providers with rich IP reserves entering the card game industry through a combination of authorization and self-operation. Collectible card games meet the diverse needs of users, and the market size may continue to grow rapidly under the driving force of increasing volume and price. Collectible Card Games (TCG) refer to cards with specific themes that consumers can collect, exchange, or play with, divided into competitive (with fighting as the core function, represented by Pokmon TCG, etc.) and non-competitive (with collecting and appreciation as the core function, represented by NBA player cards, My Little Pony cards, etc.). Under the driving force of increasing volume and price, the market size may continue to grow. According to Wisdom Consulting, the market size of collectible card games in China increased from 700 million yuan in 2017 to 12.2 billion yuan in 2022, with a CAGR of 78.4%, and is expected to reach 31 billion yuan by 2027, with a CAGR of 20.5% from 2022 to 2027. From a quantitative perspective, the repurchase rate of cards and the user base are expected to increase. In terms of repurchase rate, cards attract young consumers by bundling IP, gameplay options, or enhancing user stickiness to increase repurchase rates. In terms of user base, based on the social attributes of cards and the continuous development of new categories by card companies, live card openings, etc. attract new users and may continue to break barriers. From a pricing perspective, factors such as IP effect, rarity, and card skills affect the price of a single card. The per capita card expenditures in Japan and the United States are 11 and 6 times that of China (8.6 yuan in 2022), respectively, indicating a large room for increase in card expenditures in China. The current industry concentration is high, the rise of new brands may drive the landscape towards openness, and IP is a core competitive factor. From a competitive perspective, the top five companies in the card game industry accounted for a total market share of 76.7% in 2022, with the leading card game company holding a market share of 71.0%, indicating a high industry concentration. However, online emerging brands are flourishing, with Set Card Society, Hitcard, and Wanhuayungou launching differentiated categories, leading to rapid sales growth, and the competition landscape is expected to shift towards openness. The card production supply chain is mature, the categories are biased towards light, and high-quality IP resources may become a core competitive factor. Content providers with rich IP reserves enter the card game industry through a combination of authorization and self-operation, launching related card products for their own IPs, which may expand the space for IP monetization, and companies with stable and strong channel systems are expected to benefit from the high industry growth. Actively laying out in the collectible card game track, selecting companies with rich and high-quality IP reserves and outstanding channel operation capabilities. In terms of IP reserves, Alpha Group owns high-quality IPs such as Little Fairy Bailala, Super Wings, and Quantum Squadron, and launched the "Armor Warrior" collectible card game in July 2024. Shanghai Film, under the "Big IP Development" strategy, authorized Card Star Times under the subsidiary Shanghai Yingyuan to launch the "Havoc in Heaven" IP collectible card game and gradually build a "Card Hero" universe. Currently, properties such as Hulu Brothers, Sun Wukong, Nezha, and Black Cat Sheriff have joined the Card Alliance card universe. CHINA LIT leverages its huge online literature IP resources to maximize content monetization, and with the launch of "With Fengxing" and "Qing Yuenian" card games, the total GMV of IP card sales in the first half of 2024 was approximately 100 million yuan, with plans to launch well-known IP cards such as "Da Fengdagengren," "Full-time Master," "Doupo Cangqiong," "Guimi Zhi Zhu," "Yiren Zhixia," and "Fox Demon Red Girl." From a channel perspective, Shanghai Yaoji Technology has invested in the star card trading platform Card Taobao, and the company's long-standing advantage in selling playing cards may help drive the development of the card game business. Guangzhou Wahlap Technology Corporation has successively released IP cards such as "Ultraman Fusion Battle," "Pokemon Joyful," and "Minecraft Dungeons ARCADE," with a 76.2% year-on-year growth in income from anime IP derivatives in 2023, and close cooperation with upstream high-quality IP, and downstream wide-ranging arcade venues and distribution channels. Open Source Securities recommends paying attention to companies with rich and high-quality IP reserves or outstanding channel advantages, and actively laying out in the collectible card game business, focusing on companies such as Alpha Group (002292.SZ), Shanghai Film (601595.SH), CHINA LIT (00772), Shanghai Yaoji Technology (002605.SZ), and benefiting companies including Guangzhou Wahlap Technology Corporation (301011.SZ). Risk Warning: New card sales may fall short of expectations, and industry competition may intensify.