Another game has taken the gaming world by storm, sparking significant interest in related concept stocks.
On the morning of November 1st, the A-share gaming sector started with a low opening but quickly surged, with several stocks experiencing notable rallies during the trading session. Banqi Qiancheng, at one point, hit the daily limit of a 20% increase, while Glacier Network surged over 14%, and Giant Network reached its daily limit early in the morning. Other stocks, such as Shenzhou Taiyue, 37 Interactive Entertainment, and Kaiying Network, also saw gains of over 6% during the day.
According to Securities Times Data Bao, concept stocks in the online gaming sector have averaged a 4.99% increase since the beginning of the week. Four stocks, Banqi Qiancheng, Zhidu Group, Fuchun Technology, and Xinxunda, have accumulated gains of over 10%. Banqi Qiancheng, with an accumulated gain of 26.9%, leads the pack.
In recent news, a domestic live-action romantic game called “I’m Surrounded by Beautiful Girls” (referred to as “I’m Surrounded”) has consistently topped the Steam best-sellers list in the Chinese market, surpassing popular free games like “PUBG,” “CS2,” and “Apex” to secure its position as the best-selling game in the Chinese market.
The game was launched on October 17th and has received a 92.51% positive rating, with a peak of 65,435 players online within 24 hours. “I’m Surrounded” tells the story of a young man named Guyi, who is surrounded by beautiful women competing for his affections. Guyi, the first-person protagonist, is portrayed as a struggling individual burdened by debt and repeatedly facing setbacks in his work. The game’s developers have even labeled it a “large-scale sci-fi romance film.”
Experienced gamers have pointed out that “I’m Surrounded” has its flaws, such as subpar gameplay, less well-rounded characters, and a plot that may not withstand close scrutiny. However, these issues have not hindered the game’s popularity among young players.
In comparison, the success of “I’m Surrounded” lies more in its presentation and the effort put into its cinematic elements than in its gameplay. A significant feature of the game is its “live-action interactive footage.” “I’m Surrounded” appears to target the emotional needs of its user base.
New Gaming Modes Emerge, Leading A-Share Companies Take the Lead
According to research by Shenwan Hongyuan Securities, the success of “I’m Surrounded” can be attributed to several factors: 1. It caters to user preferences, with its romantic theme, live-action filming, and a focus on real-life scenarios, making it an easy-to-play game. 2. It is competitively priced at 42 yuan. 3. Development costs are relatively low. 4. Overseas distribution and domestic social media promotion.
Shenwan Hongyuan Securities further stated that interactive live-action drama is an innovative experiment that combines short films with gaming, tapping into the deep-seated demands for entertainment experiences. The fusion of virtual and real interactive entertainment experiences has a strong appeal, encouraging innovation and experimentation in the media industry. The low valuations of the current media sector partially result from pessimistic expectations due to slow growth and stagnation in innovation, but the emergence of new entertainment forms can alleviate these concerns.
China Merchants Securities Research Report suggests that, benefiting from the widespread adoption of AI technology and new business models this year, the “short film + game” model is expected to become increasingly common. This will lead to improved game production efficiency, reduced production complexity, and enhanced monetization capabilities for high-quality content.
Recently, some publicly-listed companies have responded to the trend of interactive gaming. On October 31, Banqi Qiancheng announced that the long-length live-action full-video interactive detective game “Hidden Detective,” jointly produced with Dayu Kuaiyou and Bilibili Games, is currently in the testing and approval phase.
Chinese Online stated that its overseas subsidiary, CMS, has released interactive game “Chapters” and live-action short film product “ReelShort.” “Chapters” is an interactive reading game.
Jiachuan Vision’s Pan-Entertainment Platform mainly includes virtual social lobbies, VR social games, VR live broadcasting, and other applications.
Skyworth Digital has signed a global cooperation agreement with motion gaming company Nex and will release a live-action motion gaming entertainment product, “Olympia (Playground),” designed for international audiences for use on large-screen TVs.
Zhidu Group’s subsidiary, Zhidu Universe, is currently developing an immersive social game project based on VR environments.
Several Popular Gaming Stocks Create Deep Pitfalls
The application of AI technology can lower costs and improve efficiency for gaming companies, especially in the field of art. At the beginning of this year, the A-share online gaming sector experienced a surge in stock prices due to the rise of AI in gaming. After a few months of adjustments, many online gaming stocks have retraced significantly.
Data from Data Bao shows that as of the close on November 1st, the average retracement from the year’s high for concept stocks in the online gaming sector was 39.82%. Stocks like Shengtian Network, Youzu Network, Dianhun Network, Kunlun Wanwei, Glacier Network, Jiubite, Tomcat, and Yaoji Technology have retraced more than 50%.
In terms of financial performance, for the first three quarters of this year, 18 online gaming stocks reported year-on-year increases in net profit or turning losses into profits. Companies like Aofei Entertainment, Xinghui Entertainment, and Guomai Culture have successfully turned losses into profits, with net profits for these three stocks reaching 81 million yuan, 57 million yuan, and 29 million yuan, respectively.
Xunyou Technology, Shunwang Technology, Zitian Technology, Glacier Network, and Century Huatong have all reported a doubling of net profits. For example, Xunyou Technology achieved a net profit of 30 million yuan, marking a 12.24-fold increase year-on-year, primarily due to the company’s low profit base in the same period of the previous year when it earned only 2.26 million yuan.
Currently, six online gaming concept stocks have a trailing P/E ratio of less than 20 times, including Chinese Media, Jiubite, Yaoji Technology, 37 Interactive Entertainment, Zhejiang Cultural Media, and Kaiying Network.