Open source securities: AI may empower the industry to reduce costs and improve efficiency. The media sector may welcome valuation and performance resonance.

Open Source Securities released a research report stating that the media sector saw an increase in October, which may be mainly due to the market-wide rise driven by policy initiatives. Looking ahead, with the steady release of new games and several top films expected to be scheduled for the 2025 Chinese New Year and other important periods, the release of content may help boost the performance of the gaming and film sectors. The advertising sector may continue to improve with the recovery of consumption, while the publishing sector is expected to maintain stable performance with high dividend characteristics. AI may continue to empower various sub-industries in the media sector to reduce costs, improve efficiency, and expand new monetization models, leading to a valuation and performance resonance in the media sector. The main points of Open Source Securities are as follows: 1. Review and Outlook: AI progress serves as the main catalyst for the market, and the performance of the content (film, gaming) sector is significantly affected by the supply side. There may be a dual recovery in performance and valuation in the future. The media sector experienced two rounds of increases in February-March and October of 2024, with the former driven by advancements in the AI industry, such as OpenAI launching video generation models Sora and Kimi, and the latter mainly driven by market-wide growth under policy initiatives. Within the sector, the advertising and publishing sectors outperformed the industry as a whole, while the gaming and film sectors fell behind. In terms of valuation, the sector's PE ratio has declined since May. In terms of performance, the advertising and publishing sectors showed relatively steady performance in the first three quarters of 2024, with the publishing sector highlighting high dividend characteristics. The gaming sector was affected by weak supply of new games, while the film sector saw a decline in performance due to insufficient supply of top films. Looking ahead, the steady release of new games and the scheduling of top films may help boost the performance of the gaming and film sectors, while the advertising sector may continue to improve with the recovery of consumption. The publishing sector is expected to maintain stable performance with high dividend characteristics, and AI may continue to empower various sub-industries in the media sector, leading to a resonance in valuation and performance in the media sector. 2. One of the core themes in 2025: AI application The continuous introduction of AI applications may gradually open up commercialization opportunities. New "AI+film" products are emerging, AI is beginning to accompany users in large numbers, AI agents are helping to reduce costs and increase efficiency in the e-commerce industry, and AI is significantly enhancing marketing productivity. The "AI+education" sector is evolving, with commercialization starting to take place. Recommended companies include Mango Excellent Media, Kuaishou-W, Hangzhou Shunwang Technology, and Beijing Zhidemai Technology, with beneficial targets including Zhejiang Huace Film & TV, Zhejiang Jinke Tom Culture Industry, Doushen Education & Technology Inc., and Southern Publishing and Media. 3. One of the core themes in 2025: Cultural overseas expansion The competitiveness of domestic mobile games in overseas markets remains strong, with "Black Myth: Wukong" driving the overseas expansion of PC and console games becoming an important driver. With demand and supply resonating, the short-form content overseas market is expected to continue high growth, reaching a market size of billions of dollars. TikTok's user base is growing rapidly, promoting commercialization and creating growth opportunities for companies expanding overseas marketing. Recommended companies include Tencent, XD INC, Beijing Ultrapower Software, Perfect World, and G-bits Network Technology, with beneficial targets including Wuxi Boton Technology, COL Group Co., Ltd., BlueFocus Intelligent Communications Group, and Easy Click Worldwide Network Technology. 4. One of the core themes in 2025: IP derivatives (1) Animation and game peripherals: The large base of Generation Z users is driving the "valley" economy that provides emotional value and fulfills spiritual needs, leading to industry expansion driven by supply-side releases. (2) Collectible card games: Driven by diverse needs such as user collection and social interaction, prices and quantities may rise together, pushing the market size to continue high growth. Recommended companies include Shanghai Film, Shanghai Yaoji Technology, and Alpha Group, with beneficial targets including Guangzhou Wahlap Technology Corporation. Risk warning: AI model development progress falling short of expectations, delays in the release of new games or lower-than-expected revenue, IP derivative industry growth falling short of expectations, etc.