Aviation Industry Securities: AI applications are moving from themes to realization, with content supply driving sector recovery.

AVIC Securities has released a research report stating that the sentiment in the media sector has improved in the short term, and AI applications are transitioning from thematic investment to being driven by fundamentals. Improvements in the supply of quality content in July, combined with the ongoing iteration of multimodal models, are driving a recovery in the film and television, short drama, and advertising marketing sectors. Currently, valuations and the chip structure in the media sector are at relatively low levels. As AI video generation capabilities cross the commercial threshold, domestic model usage increases, and corporate payment demands grow, an AI business closed loop is gradually taking shape. It is recommended to focus on performance confirmation, prioritizing Token operations and AI marketing, followed by multimodal content companies with IP and platform advantages, as well as media channels benefiting from concentrated customer acquisition through AI applications. AVIC Securities' main points are as follows: The sentiment in the media sector improved in July, but its performance for the year still awaits fundamental improvement. In July, the media sector rose by 3.09%, ranking 12th among Shenwans primary industries; publishing, television broadcasting, and advertising marketing led the gains, increasing by 8.94%, 7.87%, and 6.45%, respectively. Year-to-date, the media sector has still declined by 16.24%, ranking 23rd, primarily affected by funding bias towards AI computing hardware, the lag in application performance realization, and decreased institutional allocation. Subsequent recovery of the sector still requires support from the commercialization of AI applications and improved mid-year performance. Key industry performance is divergent, with focus on improvements in content supply and advancements in AI industrialization. In terms of film and cinema, the concentrated release of quality films has led to a noticeable rebound in box office and audience attendance in July, and various types of films in August are expected to maintain the summer box office momentum; for short dramas and animations, AI continues to lower the barriers to content production, accelerating the videoization of online literature and comic IPs. However, high customer acquisition costs, a retreat of platform subsidies, and stricter regulations will accelerate the industry's cleansing process, increasing the importance of quality IPs and platform distribution capabilities; in advertising marketing, AI applications are gradually entering a concentrated customer acquisition phase, with medium-tier media and internet advertising expected to absorb incremental budgets, while marketing agents, GEOs, and dialogue-based advertising are promoting the industrys upgrade from single-point creative tools to full-link automation. AI applications are shifting from thematic investment to fundamental-driven approaches, with attention to commercialization realizations. The upgrades to Seedance 2.5 and the increased share of domestic models are strengthening both content supply and Token demand, coupled with performance validation from overseas tech companies, indicating a gradual formation of a closed loop in the AI industry chain. It is suggested to layout along three main lines: first, Token operations and AI marketing with higher commercialization certainty, focusing on Easy Click Worldwide Network Technology and BlueFocus Intelligent Communications Group; second, content platforms that benefit from multimodal cost reductions and IP videoization, focusing on COL Global Co., Ltd., Kunlun Tech, and IReader Technology; third, media channels benefiting from concentrated customer acquisition through AI applications, focusing on Focus Media Information Technology, which has both defensive attributes and incremental advertising flexibility. Risk warnings: The commercialization of AI applications and performance realization may fall short of expectations; the supply of film and short drama content may not meet expectations; the rising costs of acquiring short drama audiences and changes in platform policies and regulatory rules; advertiser budget recovery may be slower than expected; intensified industry competition; and key companies may have operating performance below expectations.