Growth Dragons Weekly: China's Hottest Game Wukong; HKEX, Amer Sports, Pop Mart, Luckin, and Zeekr Showed Growth
What happened in China this week:
Wukong: China Produced the Hottest Game in the World
HKEX Sees 69% Rise in IPO Applications; Amer Sports and Popmart Share Prices Surge Over 18% This Week
Zeekr, an Emerging Premium EV Player, Reports 36% Revenue Growth and Launches Battery That Charges in 10.5 Minutes
Luckin Expands to S.E.A. and the U.S.
Baidu and SenseTime Hold Nearly 40% of China’s AI LLM Market Share
#1 Wukong: China Produced the Hottest Game in the World
Taking the world by storm may be an understatement to describe the debut performance of Wukong in the world of gaming. Its release this week and listing on steam, a global gaming platform, saw huge sales piling in. Many Chinese businesses provided a holiday for their workers to take a day off to try out this new game.
Wukong is China’s first AAA video game. The classification of AAA for games means there is a huge budget provided to develop the graphics of the games and marketing. These games are generally expected to sell millions of copies worldwide. According to South China Morning Post, Wukong garnered 2.22 million concurrent players in less than 24 hours after release, the most ever on Steam.
Previous Chinese games that achieved significant global demand include miHoYo’s Genshin Impact and NetEase’s Naraka: Bladepoint. However, both of these are mobile games, which typically require less development time compared to Wukong. Wukong emerged at an opportune moment, following China’s relaxation of its video game industry regulations, and it is backed by Tencent. This game represents a boost for both Tencent and China’s video game industry. According to Tianyancha, Tencent currently owns a 5% stake in Game Science, the studio behind Wukong.
The significance of this game goes beyond its potential for high sales; it plays a crucial role in promoting Chinese culture and mythology to a global audience. This cultural propagation through the game will be fundamental for the expansion of Chinese businesses internationally. While 90% of Wukong players are Chinese, the game still boasts at least 200,000 international players, highlighting its substantial outreach.
One business that stands to benefit significantly from this game is Zhejiang Publishing & Media (601921), the game’s publisher. The company not only handled the publishing but also contributed to the game’s development, including efforts like scanning 3D models of ancient temples. According to a report by Goldman Sachs, sales through Steam could be a major revenue driver. In the best-case scenario, the game could sell 20 million copies on Steam alone, generating over 5 billion yuan in revenue.
However, we believe the game's revenue-generating potential may be limited, as the developers are leaning towards a one-time payment model rather than incorporating in-game purchases to sustain recurring revenue. Additionally, since Wukong is a single-player game with a fixed number of stages, it is likely to reach a sales plateau in the near future.
While some stocks, such as Huayi Brothers Media (300027) and Citic Press (300788), have seen impressive gains—rising to the 20% limit—due to their direct or indirect connections to the game, we view these as speculative plays. Such gains are likely unsustainable, and we anticipate their share prices will decline as the initial hype surrounding the game fades.