**Briefing: Price Wars in the Photovoltaic Industry Lead to Losses for Sungrow Power**
March 12, 2025
Due to a decline in prices across the photovoltaic supply chain, solar equipment manufacturer Sungrow Power Holdings Limited (0757.HK) issued a profit warning on Tuesday, projecting losses between **2 billion and 2.4 billion yuan** for the fiscal year of 2024, compared to a profit of **112 million yuan** in 2023.
The company stated that the oversupply in the entire photovoltaic industry chain, coupled with fierce competition among peers lowering prices to gain market share, has led to significant price reductions for upstream and downstream photovoltaic products below cost. This has resulted in a decrease in shipments of the company’s main product, photovoltaic modules, leading to losses and the idling of some production lines. Additionally, the company anticipates recognizing impairment losses on property, plant, and equipment.
Sungrow Power indicated that it will intensify efforts to enhance operational efficiency and strictly control costs while continuing to actively enhance its competitive advantages. The board and management maintain confidence in the company’s long-term development. On Wednesday, Sungrow Power’s stock opened down **5.7%** at **0.065 HKD**, closing at **0.067 HKD**, a **2.9%** decline.
**Li Shida**
To subscribe to the weekly free newsletter from Bamboo Works, click here.
—
**News Summary: JD Logistics’ Technology Upgrade Drives Profit Nearly Tripling**
March 12, 2025
**Briefing: Baishi Group’s Performance Surges with Profit of 3.4 Billion**
March 11, 2025
**Briefing: Find Steel Group Completes De-SPAC Transaction and Lists in Hong Kong**
March 11, 2025
**Briefing: Jiumaojiu Issues Profit Warning, Expects Earnings to Plunge by 89%**
March 10, 2025
**Briefing: Chifeng Gold Opens Steady on First Day of Listing**
March 10, 2025
**Briefing: Gome Retail Anticipates Up to 20% Increase in Losses Last Year**
March 7, 2025
**Video Briefing: Baidu’s Financial Report Highlights AI Power, Luobo Kuai Pao Continues Expansion**
March 12, 2025
—
**Briefing: Xindong Turns Loss into Profit of 940 Million; Can Growth Momentum Continue?**
March 12, 2025
Thanks to the success of new games, Xindong Company turned a profit last year, but a decline in the number of new games raises concerns for sustained growth.
**Key Points:**
– The company expects to report a net profit between **860 million and 940 million yuan** for the previous year, compared to a net loss of **65 million yuan** in 2023.
– Last year, only **four** game licenses were approved, half of what was granted in 2023.
The release of the domestic 3A game “Black Myth: Wukong” sparked excitement in the gaming industry. With the regulatory environment stabilizing and the consumer market recovering, the Chinese gaming sector may be entering a new cycle of resurgence, as many game companies report positive earnings.
Starting from web games, Xindong Ltd. (2400.HK) has developed several mobile games including “Sausage Party,” “Xindong Town,” and “Let’s Go Muffin.” Recently, it issued a profit warning, announcing its successful turnaround from a loss to a profit.
According to the earnings forecast, the company’s revenue for last year is estimated to be between **4.96 billion** (approximately **680 million USD**) and **5.04 billion yuan**, representing a year-on-year increase of approximately **46.3% to 48.7%** from **3.389 billion yuan** in 2023.
Following the profit warning, Xindong’s stock surged, climbing **15.37%** the next day, bringing its market value close to **18 billion HKD**.
The gaming industry is known for its high upfront investments with uncertain returns. It is common for new games that require substantial time and financial investment to flop after launch. Creating a blockbuster game often feels like a lottery win.
**New Games Drive Revenue Growth**
From 2021 to 2023, Xindong invested significant resources into research and development while older games declined in revenue, resulting in shareholder losses of **860 million**, **550 million**, and **83 million yuan** respectively. The improvement in performance began to show in the first half of last year, with revenue hitting **2.221 billion yuan**, a **26.7%** increase year-on-year; gross profit increased by **44.3%** to **1.497 billion yuan**, and shareholder profits surged by **127.4%** to **205 million yuan**, marking a dual rise in revenue and profit.
The company credits this significant boost to the strong performance of newly released self-developed games like “Let’s Go Muffin,” “Sword of Lily,” and “Xindong Town,” which have contributed to revenue and gross profit margins. In the first half of last year, the gaming sector was the main contributor, generating **1.49 billion yuan** in revenue, up nearly **30%**.
Most of the company’s revenue comes from gaming operations, which include sales of virtual items and paid games. By the end of the first half of last year, gaming-related revenue accounted for **66.9%** of the total, with **33.1%** from its gaming platform TapTap, generating revenue through online promotion services.
TapTap is a player interaction community and game recommendation platform similar to Steam by Valve in the U.S., where players can download games from official channels, provide reviews, discuss games, and interact with other players.
Fueled by the launch of new games and exclusive marketing activities, the average monthly active users (MAUs) of the Chinese version of the TapTap app reached **43.24 million**, growing **27.3%** year-on-year in the first half of the year.
The two games launched last year received positive feedback. “Let’s Go Muffin” topped the sales charts in the Hong Kong, Macau, and Taiwan markets shortly after its release in early 2024, while “Xindong Town,” launched in July in mainland China, exceeded **25 million downloads** in its first month, also topping the download charts on the Apple Store. According to TapTap platform data, the current download count has surpassed **39 million**.
**New Games Displace Old Ones**
However, as new games draw attention, older titles inevitably risk being forgotten. “Sausage Party,” which launched in 2018, has faced declining revenue. Since 2023, both its monthly paying users and active users have decreased. The cycle of new games outperforming old ones is a common trend in the gaming industry, with the ability to sustain profitability now dependent on whether new games can compensate for the losses.
According to the “2024 China Game Industry Report” published at the end of last year, the actual sales revenue of China’s gaming market is projected to grow **7.53%** year-on-year to **325.783 billion yuan** in 2024, with domestic game users reaching **674 million**, reflecting a **0.94%** increase.
Although both metrics are at historical highs, the number of games approved last year was **32%** higher than in 2023, yet the growth rate of sales revenue fell short of the **13.9%** seen in 2023, indicating a slowdown in market growth, which suggests increased competition within the industry.
To facilitate the launch of new games, Xindong’s marketing expenses soared to **700 million yuan** in the first half of last year, up **110.4%**, surpassing research and development expenditures of **420 million yuan**, which decreased by **20%** year-on-year, indicating a reduction in game reserves. According to data from the National Press and Publication Administration, the company received approval for only **four** game licenses last year, half of the number in 2023. Considering that new games are already starting to realize potential income, the shrinking game reserve could hinder continued rapid growth.
From a price-earnings ratio perspective, due to a low profit base and a recent surge in stock prices, Xindong’s price-earnings ratio has reached **606 times**. If we estimate a profit of **900 million yuan** for 2024, the ratio would drop to about **18 times**, lower than Tencent’s **28 times** but higher than NetEase’s **16 times**. Given that NetEase’s scale is significantly larger than Xindong’s, its stock price is not considered cheap.
—
To subscribe to the weekly free newsletter from Bamboo Works, click here.
**Facing Internal and External Challenges, 52Toys Rides the Toy Wave to Go Public**
With the rapid growth of China’s collectible toy market, the company seeks to raise funds through an IPO for expansion and to create iconic IPs.
**Key Points:**
– 52Toys has engaged investment banks to prepare for a Hong Kong listing; its competitor, Blok, went public earlier this year.
– This collectible toy manufacturer faces increasing competition overseas and is lagging behind domestic rivals in developing proprietary intellectual property.
**Xia Fei**
The strawberry bear, a character from Disney’s animated movie “Toy Story 3” and once a villain, has now become a favorite among young Chinese toy collectors. The charm of the strawberry bear lies in its lifelike design—its eyes seem to follow you wherever you go. The series of palm-sized strawberry bear figurines, each priced around **$10**, is sold in blind boxes, adding excitement for collectors who only discover which figurine they received upon opening the box.
The transformation of the strawberry bear from a film character to a star toy is driven by 52Toys, a rising star in China’s booming collectible toy market. Known for blending creativity with cultural trends, the company is swiftly carving out a niche in this fast-growing industry.
An insider revealed that 52Toys, pronounced “I love toys,” is in talks with investment banks to prepare for an IPO later this year, aiming to raise up to **$200 million**. Reports indicate that the company has raised over **$80 million** from investment institutions like CICC Capital and the state-owned Qianhai Mother Fund, though company executives have denied these claims as rumors without further details.
Headquartered in Beijing, 52Toys stands out in the collectible toy craze in China, where these toys offer much higher profit margins than traditional toys. The company aims to challenge established firms like Pop Mart (9992.HK) and Blok (0325.HK), with Pop Mart’s stock price skyrocketing over fivefold in the past year and Blok focusing on the mass market, rising **12%** since its listing in January.
In addition to its popular blind box products, 52Toys offers five other product lines, including action figures, designer collectibles, and transformation toys, each targeting specific demographics: blind boxes resonate more with young female consumers, while the Beast Box series, featuring transforming animals, primarily attracts male fans.
The company employs a “dual-track strategy” for intellectual property (IP) development, creating its own designs like the Beast Box series and Kimmy & Miki, while also collaborating with well-known brands like Disney Princess and Harry Potter.
**Late to the Game?**
Co-founder Chen Wei is a seasoned veteran in the toy industry, having started working for American McFarlane Toys and Japanese Bandai after graduating from university 20 years ago. In 2015, he co-founded 52Toys with Huang Jin, the creator of the popular Chinese board game “Three Kingdoms Kill.”
Designer toys have become increasingly popular among young people in China, who seek emotional fulfillment and self-expression through collectibles. The social aspect of trading items adds an extra layer to the toy-collecting experience. Frost & Sullivan projects that from 2022 to 2026, the Chinese market will grow **24%** annually, surpassing **110 billion yuan** (approximately **$13.8 billion**) by 2026. The current customer base for such toys is around **30 million**, which is expected to rise to **49 million** by 2030.
However, in an increasingly competitive market, whether 52Toys can move quickly enough to build its own fanbase remains uncertain. Despite claiming to open three to five new stores each month, with sales per square meter reaching **10,000 yuan** (about **$1,400**), it currently has only six offline stores in first-tier cities like Shanghai and Beijing. In contrast, co-founder Chen Wei has shared ambitious goals to operate a network of over **100 stores and 1,000 vending machines** nationwide by next year.
At the same time, the company is heavily investing in global expansion, following the trend of Pop Mart, which has diversified geographically to mitigate risks amid a slowing domestic economy. Like many Chinese companies, 52Toys’ internationalization strategy begins in Southeast Asia, where a large ethnic Chinese population exists, and the market shares many similarities with the Chinese market.
In the first half of 2024, more than **40%** of Pop Mart’s overseas revenue came from Southeast Asia, its largest overseas market. Pop Mart previously reported over **120%** revenue growth in the third quarter, with domestic growth at **60%** and overseas revenue surging over **440%**. Additionally, Pop Mart reported a gross profit margin of **61.5%** for its domestic business and **70.1%** for international operations, far exceeding the **48%** gross margin of global giant Mattel (MAT.US) over the past five years.
Since entering the overseas market in 2017, 52Toys has expanded to over **10 countries and regions**. It now views Thailand as a significant market, having opened **10 new stores** there within a year as of December last year.
However, products popular in China may not find the same success in other markets. On Southeast Asia’s leading e-commerce platform Shopee, several Beast Box series items sold fewer than **100 units** monthly, a performance that falls short for an ambitious company.
**Over-Reliance on External IP**
Another pressing challenge for 52Toys is to prove its ability to create original hits rather than overly relying on established IPs like the strawberry bear. The company follows the “721 rule,” allocating **70%** of resources to market-responsive products, **20%** to forward-looking designs, and **10%** to experimental ideas. So far, its achievements in developing proprietary IP seem relatively limited.
On Tmall, a popular shopping platform in China, only four of 52Toys’ products have sold over **10,000 units**, and only one is based on original IP. In contrast, Pop Mart has **27 products** that have surpassed this sales milestone, with over half of those utilizing self-developed characters like Jasmine and Labubu.
While it remains unclear how much revenue 52Toys generates from original IP, it may need to produce more hit products to convince investors that it is a manufacturer capable of independently developing collectibles and generating substantial profits like Pop Mart.
On TikTok, Pop Mart’s Labubu, a mythical creature with pointed ears and a mischievous gaze, has ten times the fan base of all 52Toys’ fans combined. These figures have propelled Pop Mart’s market capitalization to an impressive **145 billion HKD** (approximately **$18.7 billion**) following a recent surge in stock prices, with a price-earnings ratio nearing **90 times**. Although 52Toys is unlikely to achieve such a high valuation, it must reduce its dependence on borrowed characters like the strawberry bear and focus on developing its own hits to compete with industry leaders and attract investor interest in its collectible toy business.
—
**Aces Fade as Xingbang Entertainment Faces Challenges**
Xingbang Entertainment plans to go public in Hong Kong, but the group’s income significantly declined in the first nine months of 2024.
**Key Points:**
– Xingbang Entertainment focuses on role-playing games (RPGs), but its performance turned from profit to loss in the first nine months of 2024.
– The number of paying users for its two flagship titles has plummeted.
With the rise of smartphones making entertainment more personalized, computer games have shifted from past console eras to mobile gaming. Amid a positive market atmosphere for Hong Kong stocks, Xingbang Entertainment, which specializes in mobile games, plans to pursue a listing in Hong Kong.
According to its listing application documents, in 2023, Xingbang Entertainment’s RPG games generated revenue of **5.5 billion yuan**, capturing a **6%** market share and ranking as China’s third-largest developer of mobile RPGs, with “Jiuzhou Xianjian Chuan” and “Tianjian Qiyuan” as its top-grossing games.
Founded in 2014 by Guo Zhongjian and later taken over by his daughter Guo Xiaolan, who serves as the current chairperson, executive director, and CEO, Xingbang Entertainment ranks as the sixth-largest mobile gaming company in China by gross billings, which refers to the total amount players pay for in-game purchases within a specified timeframe.
The gaming industry involves upstream, midstream, and downstream segments. Upstream includes IP holders and game developers, midstream comprises game publishers and distribution channels, while downstream refers to gamers. IP holders license their IP to developers, who design and create mobile games, while publishers launch, promote, and market these games, with distribution channels providing platforms for downloading and upgrading games. Xingbang Entertainment is one of the companies involved in game development, publishing, and operation.
**RPG Market Growth**
Mobile games are primarily divided into four categories: RPG (role-playing games), SLG (simulation and strategy games), card games, and MOBA (multiplayer online battle arena) games, with the RPG market holding the largest share. In 2023, the RPG industry scale reached **92.3 billion yuan**, accounting for **30.5%** of the total market size of **302.3 billion yuan**. It is estimated that the market will expand to **116.6 billion yuan** by 2028, achieving a compound annual growth rate of **16.2%**.
The RPG genre involves players taking on roles in ever-changing fantasy or fictional worlds, where they are responsible for their character’s actions. Compared to casual games, RPGs typically have a longer lifecycle, which is why Xingbang Entertainment primarily focuses on developing RPG games.
In recent years, the mobile gaming market has seen a surge in the popularity of mini-games. This trend arises from busy players lacking sufficient time for entertainment, leading to the creation of mini-games that utilize HTML5 and similar technologies embedded in platforms like WeChat, Douyin, and Alipay, allowing players to enjoy games without downloading them.
Due to the ease of access to mini-games, the domestic mini-game market has experienced rapid growth, with a compound annual growth rate of **74.9%** from 2018 to 2023, reaching **31.1 billion yuan** in 2023. Xingbang Entertainment has emerged as an industry leader, capturing a **16.4%** market share in 2023. The mini-game market is projected to increase to **126.1 billion yuan** by 2028, benefiting industry leaders like Xingbang Entertainment.
**Declining Performance**
Despite the fast growth of the mobile gaming industry, Xingbang Entertainment has faced average performance. For the nine months ending September 2024, revenue plunged **50.8%** year-on-year to **2.095 billion yuan**, leading to a loss of **47.17 million yuan**. The decline was exacerbated by a significant drop in paying users for its two flagship games, “Jiuzhou Xianjian Chuan” and “Tianjian Qiyuan,” which have seen their average monthly active users decrease to **6.71 million** and **3.74 million**, representing year-on-year declines of **78.6%** and **81.4%** respectively. The average number of paying users also dropped sharply by **67%** and **52.9%**, falling to **93,000** and **26,400**, respectively, which severely impacted the company’s revenue.
Each mobile game follows a life cycle typically comprising three stages: growth, maturity, and decline. The growth phase establishes the player base and market coverage, while the maturity phase continues to generate revenue. The decline phase sees players gradually lose interest, leading to a significant drop in active users and game revenue. The life cycle of Chinese RPG games ranges from **10 to 24 months**, with iconic games lasting **54 to 72 months**. “Jiuzhou Xianjian Chuan,” which has been operational for about **62 months**, and “Tianjian Qiyuan,” operational for approximately **50 months**, are clearly in the decline phase.
Although newer games like “Shanhai Jiantu” and “Yijie Shenyuan: Daling Wang” were launched in June and August 2023, the average number of paying users for these games does not compare favorably with the previous flagship titles, leading to a significant revenue drop for the group. The likelihood of Xingbang Entertainment recording losses for the entire year of 2024 appears high.
**Difficult to Achieve High Valuation**
Based on the first three quarters of 2024, Xingbang Entertainment’s revenue is projected to decline by **50%**, estimating annual revenue at only **2.66 billion yuan**. Bloomberg data indicates that this revenue is similar to its industry peer, Zhongjiu Technology Group (0302.HK), which has a market value of **1.74 billion yuan** and an expected price-earnings ratio of **4.7 times**. However, given that Xingbang Entertainment may record losses this year, it is likely to be valued using the sales ratios observed in Zhongjiu’s past six months, which range from **0.6 to 1 times**, suggesting a prospective market value of **1.6 to 2.6 billion yuan** upon listing.
Overall, Xingbang Entertainment lacks a solid lineup of popular new games. With its flagship titles entering a decline phase, the company faces enormous challenges in its future operations, compounded by intense industry competition, making recovery from this downturn a difficult task.
