19 Dec 2019 CMB International Securities | Equity Research | Sector Update China Game (A-share) Consolidation & Segmentation OUTPERFORM (Maintain) We initiated coverage on China Game (A share) sector, with top picks of Perfect China Internet Sector World (“PW”) and Sanqi Interactive (“Sanqi”). As China game industry has stepped into mature stage, we expect top players to get stronger, and more Sophie Huang opportunities will derive from overseas expansion, selective productions and e- (852) 3900 0889 Sports tailwinds.
[email protected] Stepping into mature stage. China game market has stepped into a mature stage (with 11% YoY growth in 1H19), despite moderate recovery in 2019 for Perfect World: 12-mth Price game approvals relaunch. Mobile games, accounting for 65% of total game Performance market, are still on growth track. Game players saw 5.1% YoY growth in 1H19, (RMB) and we view players close to saturation given already-high penetration of 45 002624 CH SHSZ300 (rebased) 61.8%. Looking ahead, 5G, Cloud Game, female gamers and short-video 40 channel marketing could be further drivers. 35 30 The bigger, the stronger. We expect top players to get stronger, with 25 20 advantages of IP resources, channel marketing, data, and self-development 15 ability. As game market growth slows down and Top 2 leaders continue to 10 Dec-18 Mar-19 Jun-19 Sep-19 Dec-19 gain shares, we think it is important for players to explore other segmentations or new opportunities, including overseas market, female games, mini games Source: Bloomberg and e-Sports tailwinds. Sanqi: 12-mth Price Performance Eyes on overseas expansion and quality enhancement.