China Galaxy Securities: Re-evaluation of Hong Kong stocks accelerates, focusing on state-owned enterprises, Hong Kong media internet, and AI + vertical industry three main themes.

China Galaxy Securities released a research report suggesting to adopt a strategy based on the stable core business of central state-owned enterprises, followed by steady progress, focusing on investment strategies in the Hong Kong stock media and internet sector, as well as in AI+ vertical industry sectors driven by AI acceleration. 1) Hong Kong stock media and internet: It is recommended to focus on internet video platform companies with stable business growth, solid fundamentals, and continuously improving profitability levels. 2) AI+ vertical industries: It is recommended to focus on companies related to content production under AI empowerment: AI+ film and television, AI+ gaming, AI+ advertising, AI+ e-commerce. 3) Central state-owned enterprises: It is recommended to focus on targets with stable main business operations, continuous expansion of extension business, and steady increase in market share, combined with the empowerment of the AIGC intelligent platform. Key points from China Galaxy Securities: Industry review for the first half of 2025: Media industry index fluctuated upward during the year Since the beginning of 2025, influenced by DeepSeek and related AI factors, the index reached a temporary high point in February and then entered a period of fluctuation and adjustment. Coupled with the impact of the Sino-US tariff policy, the index experienced a slight pullback. Subsequently, driven by the "new consumption" concept (IP) and the overall better-than-expected performance of the gaming industry in Q1, the index as a whole showed some signs of recovery. As of June 12, 2025, the media sector had a year-to-date rise and fall of 11.18%, compared to -1.09% for the Shanghai and Shenzhen 300 index. Industry outlook: Reevaluation of Hong Kong stock asset value, accelerated by AI empowerment The triple logic of "financial repair + policy catalysis + inflow of high-quality targets" has propelled Hong Kong stocks from a global valuation lowland to a highland of value. Meanwhile, against the backdrop of global industrial chain restructuring, domestically developed AI led by DeepSeek is becoming a strategic fulcrum for China's AI industry to transition from "technological catch-up" to "industry benchmark". The Chinese AI industry is expected to achieve a key breakthrough from technology following to ecosystem dominance. DeepSeek's open-source strategy breaks the technological barriers of the traditional closed-source model and reshapes the global AI value chain with low-cost, high-performance features. The ecological synergies and globalization practices triggered by this may redefine the industrial landscape of the digital era. Investment viewpoint: Build on central state-owned enterprises, capture high-elasticity sectors In the first half of 2025, the overall performance of the industry has significantly improved compared to the same period in 2024, and high-elasticity sectors have a higher certainty of future performance. After a wave of market rally in the A-share market post the Spring Festival, the market is currently in a rotation and adjustment period. The recommendation is to adopt a strategy based on the stable core business of central state-owned enterprises, focusing on the Hong Kong stock media and internet sector, as well as the investment strategy in AI+ vertical industry sectors driven by AI acceleration. Risk warning: Risks of intensified market competition, content review and approval risks, uncertainty risks in resource integration, risks of new emerging formats falling short of expectations, risks of AI applications not meeting expectations.