Guoxin Securities: Valuation and Crowding Double Bottom, Seize Opportunities in Gaming Sector Allocation

Guotai Junan Securities released a research report stating that, after sufficient adjustment in the earlier period, the valuation and transaction-level risks in the gaming sector have been largely released, and the sector’s intrinsic growth logic has not undergone any substantial changes. Against the backdrop of a marginal improvement in risk appetite, the gaming sector is expected to show better upside elasticity and a stronger downside safety margin.

Guotai Junan Securities’ main views are as follows:

Event

Affected by factors such as macro risk appetite suppression, since the beginning of the year, the gaming sector’s individual stocks and indices have adjusted significantly, and overall performance has clearly lagged the market. Currently, the valuations of most core gaming leaders have largely fallen back to the around 15x range for 2026, placing them in the historical bottom sub-range. Trading congestion within the sector has also declined in tandem to a low level.

Gaming policy environment stable and improving

1）The current dynamic PE valuation, historical percentile of trading congestion, and absolute levels are all in the bottom range. Listed companies’ core product revenue performance is good and fundamentals remain solid, providing a safety margin on the downside, and upside elasticity is worth paying attention to; 2）The policy environment is stable and improving: game approvals have been maintained at a stable issuance pace, and the “15th Five-Year Plan” and related regulatory policies continue to release positive support signals for the gaming industry. Adjustments to revenue splits by app stores such as Apple are also expected to further thicken profits for game developers. Meanwhile, AI applications are driving industry transformation across multiple stages—from gameplay innovation and R&D efficiency improvements to operational optimization—opening up further room for long-term performance and valuation growth in the gaming industry.

Investment recommendations

Recommend industry leaders whose product cycles, performance delivery, and valuation levels are well matched. Key recommendations include Giant Network, Century Huatong, Kaiying Network, and 37 Interactive Entertainment. Also, it is recommended to pay attention to Perfect World (the performance after 《Yihuan》 launches) and other related targets.

Risk warning: ongoing pressure from macro risk appetite, regulatory policy tightening beyond expectations, new product revenue falling short of expectations, and AI enablement implementation progressing more slowly than expected, etc.

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