Wanlian Securities: Overall performance of the media industry in 2025 shows significant growth, with a substantial rebound in game and advertising marketing performance in the first quarter of 2026.

20252026Q1AIAIGC 20252026Q1 Revenue and net profit of the media industry in 2025 were significantly increased, with a steady rise in Q1 2026 revenue and stable net profit. From a revenue perspective, the media industry achieved a year-on-year increase in operating income to 535.27 billion yuan in 2025, reaching a near-year high, and net profit attributable to equity holders increased significantly by 46.45% year-on-year to 26.973 billion yuan, showing overall good performance. Gross margin remained stable, increasing slightly by 1.30 percentage points to 32.38% year-on-year. From an expense perspective, the management and financial expenditure ratios were relatively stable, while the sales expense ratio continued to rise to 13.55%. The net profit ratio increased by 1.54 percentage points to 5.16%. Looking at quarterly performance, overall operating income for the media industry in Q1 2026 increased by 3.50% year-on-year to 130.398 billion yuan. Net profit attributable to equity holders decreased slightly by 0.96% year-on-year to 10.951 billion yuan. Quarter-on-quarter, the overall operating income for the media industry in Q1 2026 decreased by 11.31% compared to the previous quarter, while net profit attributable to equity holders returned to profit, in line with cyclical trends. Game Sector (1) Significant revenue growth in 2025, with a sharp rise in net profit attributable to equity holders. The game sector achieved revenue of 114.919 billion yuan in 2025, a year-on-year increase of 23.00%, showing continued growth momentum, with net profit attributable to equity holders rebounding sharply by 222.16% to 13.684 billion yuan. The profit increase was mainly due to leading companies in the sector such as Zhejiang Century Huatong Group and Perfect World focusing on core product operations and self-developed IP iterations in 2025, actively expanding into international markets, and benefiting from the contributions of popular games and new game versions. Companies such as Shenzhen Bingchuan Network also significantly reduced sales and management expenses through cost reduction strategies, leading to an overall enhancement of the profit-making ability of the game sector in 2025, with gross and net profit margins rising by 2.12 and 7.60 percentage points respectively to 68.52% and 11.83%. (2) Significant growth in revenue and net profit in Q1 2026, with strong performance from Zhejiang Century Huatong Group. The game sector in Q1 2026 achieved revenue of 32.155 billion yuan, a year-on-year increase of 20.34%. Net profit attributable to equity holders increased by 54.32% year-on-year to 5.374 billion yuan, with Zhejiang Century Huatong Group's blockbuster product performance being a major driver of growth in the sector's Q1 2026 performance. In terms of profitability, gross margin rose to 70.76%, and net profit margin increased to 16.80%. Film and Television Sector (1) Revenue increased in 2025, with a significant narrowing of net loss. The film market performed well in 2025, with the film and television sector achieving revenue of 39.282 billion yuan, a year-on-year increase of 9.93%. The net loss narrowed significantly, increasing by 58.05% to -1.054 billion yuan, mainly due to the strong performance of Beijing Enlight Media's blockbuster film "The Legend of Nezha" in Q1 2025, driving growth in the sector. Gross and net profit margins increased by 3.48 and 4.67 percentage points to 24.59% and -2.83% respectively. (2) Significant decline in operating income and net profit in Q1 2026. The film and television sector in Q1 2026 saw a significant reduction in revenue, down 43.42% year-on-year to 7.986 billion yuan, and a sharp drop in net profit by 95.13% to 1.15 billion yuan. The revenue of over 80% of the sub-sectors in the sector saw a decline. In terms of profitability, gross margin decreased by 9.67 percentage points to 23.51%, while net profit margin also declined by 15.44 percentage points to 1.52%. Digital Media Sector (1) Slight revenue increase in 2025, with a decrease in net profit. The digital media sector achieved revenue of 29.392 billion yuan in 2025, a year-on-year increase of 2.73%. Net profit attributable to equity holders was 1.589 billion yuan, a decrease of 7.48% year-on-year. Profitability saw a decline in gross and net profit margins by 2.31 and 0.46 percentage points to 33.58% and 5.55%, respectively. (2) Slight increase in revenue and significant increase in net profit in Q1 2026. The digital media sector in Q1 2026 achieved revenue of 6.376 billion, up 6.28% year-on-year. Net profit attributable to equity holders was 448 million yuan, a 20.59% increase year-on-year. Profitability saw a decrease in gross profit margin by 0.87 percentage points to 32.26% and an increase in net profit margin by 0.71 percentage points to 6.93%. Advertising Sector (1) Slight increase in revenue for the full year of 2025, with a significant decrease in net profit. The advertising sector achieved revenue of 175.318 billion yuan in 2025, a year-on-year increase of 7.62%, but net profit decreased significantly by 55.55% year-on-year to 1.577 billion yuan. Profitability saw a decrease in gross profit margin by 0.43 percentage points to 11.52%, and a decrease in net profit margin by 1.21 percentage points to 0.92%. (2) Improvement in operating income and net profit in Q1 2026, with outstanding performance from BlueFocus Intelligent Communications Group. The advertising sector in Q1 2026 achieved revenue of 44.882 billion yuan, up 17.08% year-on-year, while net profit increased by 50.97% to 2.228 billion yuan. These improvements were driven by the performance of BlueFocus Intelligent Communications Group, with a 4.549 billion yuan increase in revenue and a 0.31 billion yuan increase in net profit year-on-year. Profitability saw a decrease in gross profit margin by 0.92 percentage points to 10.86%, while net profit margin increased by 1.20 percentage points to 5.05%. Radio and Television Sector (1) Revenue increased in 2025 but net profit further expanded. The radio and television sector achieved revenue of 45.534 billion yuan in 2025, a year-on-year increase of 2.37%, but the net loss widened to -2.083 billion yuan. This was due to shrinking revenue from top companies in the sector such as Shaanxi Broadcast & TV Network Intermediary and Guizhou BC&TV Information Network, as well as increased credit impairment losses and cost increases, leading to a further expansion of net loss in 2025. Gross and net profit margins decreased by 1.07 and 1.06 percentage points to 22.90% and -3.84%, respectively. (2) Revenue growth in Q1 2026, with continued net loss. The radio and television sector in Q1 2026 achieved revenue of 10.205 billion yuan, up 4.22% year-on-year, but net loss remained at -1.45 billion yuan, with a slight decrease in the rate of decline. Profitability saw a decrease in gross profit margin by 1.85 percentage points to 22.14% and a decrease in net profit margin by 0.09 percentage points to -0.85%. Publishing Sector (1) Decrease in revenue for the full year of 2025, with an increase in net profit. The publishing sector achieved revenue of 131.082 billion yuan in 2025, a decrease of 8.55% year-on-year, but net profit was 13.259 billion yuan, up 3.47% year-on-year, with most companies in the sector showing good net profit performance. Profitability saw a slight increase in gross profit margin by 0.42 percentage points to 33.98% and an increase in net profit margin by 1.21 percentage points to 10.40%. (2) Decrease in operating income and net profit in Q1 2026. The publishing sector in Q1 2026 achieved revenue of 28.793 billion yuan, a year-on-year decrease of 7.19%, with net profit decreasing by 15.01% year-on-year to 2.930 billion yuan. Profitability saw a year-on-year increase in gross profit margin by 0.19 percentage points to 34.15%, but a decrease in net profit margin by 0.91 percentage points to 10.38%. Risk factors: Changes in policy environment; Consumer recovery falling short of expectations; Market competition intensifying; Slow application of innovative technologies; Risk of impairment of goodwill.