Hong Kong stock concept tracking | The number of game approvals in October remains high, and the current valuation of the sector still stands out in terms of cost-effectiveness (with concept stocks attached)

On October 22, the National Press and Publication Administration announced the approval information for domestic network games in October 2025, with a total of 159 domestic games receiving approvals, and the approvals for imported network games were updated simultaneously, with 7 imported network games receiving approvals. The number of approvals remained high during the year, second only to the 173 games approved in August. Open Source Securities believes that the gaming industry is still experiencing a high prosperity cycle under the resonance of supply and demand. The third-quarter report may further validate the high prosperity, and the length of this prosperity cycle may exceed market expectations. The current valuation price ratio of the sector still stands out, and it is recommended to increase gaming allocations after adjustment. Among the 159 domestic network games that received approvals in October, 73 were categorized as mobile-leisure puzzle and 70 were categorized as mobile. Some of the main products of listed companies included: Tencent's "The Eight Immortals and the Adventure", 37 Interactive Entertainment Network Technology Group's "Survive for 33 Days", Kingnet Network's "Blue Moon Hero", Shenzhen Bingchuan Network's "I Want to Be the Ancestor", Shenzhen Zqgame's "The Legend of Shushan Fantasy" and "I am MT: Honor Guard Team", ARCHOSAUR GAMES' "Journey to the Clouds", FRIENDTIMES' "Firefly Expedition", etc. As for imported network games, 7 new games received approvals in October, including Yoozoo Interactive's "Crayon Shin-chan". As of now, the number of game approvals has maintained a stable frequency of issuance every month this year, and the number of approvals issued has reached 1441. Including this month, there have been 4 months in the year where the number of approvals issued exceeded 150. While issuing approvals, the National Press and Publication Administration also updated the game approval information for 2025. Perfect World's flagship game "Fantasy Tower" added a PS5 version, Giga Games' "Cairo All-around Businessman" was renamed to "Cairo Game World" and the basketball competition mobile game "The Peak Showdown of NBA" developed by Dust & Motion Technology had its publisher changed to Da Tong Northern United Publishing & Media and added a client version. The A-share gaming sector has seen significant gains this year. Wind data shows that as of October 22, the Shenwan second-level gaming index has accumulated a rise of about 66% since the beginning of the year, ranking eighth among all Shenwan second-level industries. Several game stocks have doubled this year, with Giant Network Group rising by over 210%, Giga Games rising by over 110%. In addition, Shenzhen Bingchuan Network, Kaiser, Kingnet Network, Rastar Group, etc., have all seen gains of over 70%. Open Source Securities believes that the gaming industry is still experiencing a high prosperity cycle under the resonance of supply and demand, the third-quarter report may further confirm the high prosperity, and the length of this prosperity cycle may exceed market expectations. The current valuation price ratio of the sector still stands out, and it is recommended to increase gaming allocations after adjustment. According to the latest report from Omdia, the total revenue from game subscriptions in the Asia-Pacific region is expected to grow from $6.5 billion in 2025 to $9.4 billion in the period from 2025 to 2029. It is worth noting that this growth rate significantly exceeds the global average share of subscription models in content spending. China Securities Co., Ltd. stated that after undergoing self-examination and external changes from 2021 to 2024, the gaming industry has regained vitality in 2025. In the first half of the year, the market size of domestically developed network games in China increased by 19% year-on-year. This is a product innovation cycle based on years. In the short term, the rapid growth of Q3 gaming performance can be seen, in the medium term, the wave of new products launched during the National Day and Spring Festival, and in the long term, observations on AI's influence on emotional companion games, UGC game platforms, and other native gameplay innovations. Related concept stocks: TENCENT (00700): Among the domestic network games that received approvals this time is Tencent's game "The Eight Immortals and the Adventure". In the first half of the year, Tencent achieved a revenue of 364.53 billion yuan, a year-on-year increase of 13.7%; net profit attributable to equity holders was 103.45 billion yuan, a year-on-year increase of 15.6%. The value-added services sector (games + social) had an income of 183.5 billion yuan in the first half of the year, a year-on-year increase of 16.54%, far exceeding last year's growth rate of 2.54% during the same period. Domestic game revenue in the second quarter was 40.4 billion yuan, an increase of 17%; overseas game revenue was 18.8 billion yuan, an increase of 35%. New products such as "Delta Force" and "Dune: Awakening" have boosted revenue and DAU, while existing products have supported ARPU repair through meticulous operations. ARCHOSAUR GAMES (09990): Among the domestic network games that received approvals this time is ARCHOSAUR GAMES' "Journey to the Clouds". In the first half of 2025, ARCHOSAUR GAMES' revenue reached 634 million yuan, a 44.4% increase compared to the same period in 2024 when revenue was 439 million yuan. This growth was mainly due to the launch of two new games in the domestic market, "Dragon Clan: Gates of Kasael" and "Treading on Wind", as well as the continued stable performance of their flagship product "In the Name of Shining". FRIENDTIMES (06820): Among the domestic network games that received approvals this time is FRIENDTIMES' "Firefly Expedition". FRIENDTIMES' revenue in the first half of 2025 reached 623 million yuan, a year-on-year increase of 18.5%; net profit for the period was 40.71 million yuan, a significant improvement from a loss of 72.33 million yuan in the same period last year, with a growth of 156.3%. The gross profit margin increased by 5 percentage points to 73.6% year-on-year. The improvement in performance was mainly due to the impressive performance of small games like "Dulala's Promotion Diary" and "Lingyun Nuo", as well as the increase in the proportion of high-margin channel revenue. NETEASE (09999): As of the first half of 2025, NetEase achieved a net income of 56.72 billion yuan and a gross profit of 36.53 billion yuan. In the second quarter, net income from games and related value-added services reached 22.8 billion yuan, a year-on-year increase of 13.7%. Classic games performed well, with "Fantasy Westward Journey" mobile game setting a new quarterly revenue record in 22 years, "Identity V" entering the top five of the China iOS bestseller list, and the mobile game "Ascent of the Ming" ranking third in the China iOS bestseller list. NETDRAGON (00777): Guotai Haitong released a research report stating that NETDRAGON's gaming business has shown steady growth. The long-term operation capability of the "Moyu" IP series products is strong, the AI production center helps reduce costs and increase efficiency, and improve gaming experience, leading the way in education technology going global; multiple investments are yielding returns, with the company taking a position in the group game broadcast track. The core gaming business focuses on MMORPG, with three long-standing IPs (Moyu, Conquest, and Blad & Soul) contributing stable cash flow. Among them, Moyu is a 100% original IP of the company, with steady growth in MAU, exceeding 2.5 million.