The ‘Steam’ of Hardcore Gaming: HSBC Sees 54% Upside in This Chinese Equity
While global attention remains fixated on headline-grabbing AI chips and geopolitical maneuvering, a quiet consolidation is occurring within China's digital gaming sector that suggests significant alpha for investors paying attention.
On November 20, 2025, analysts at HSBC Qianhai Securities released a bullish equity research report on Kingnet Network, explicitly highlighting the company’s pivot from traditional game developer to platform operator. The thesis is straightforward: Kingnet is building a "walled garden" for China’s most lucrative hardcore gaming IP, effectively reclaiming billions in revenue from the grey market.
For those tracking A-share opportunites, this report is notable not just for its aggressive price target, but for its identification of a structural shift in how "Legend" (Chuanqi) genre games represent a massive, under-monetized total addressable market (TAM).
A New Player Emerges: The "Legend Box" Thesis
The core of HSBC’s bullish stance revolves around "Legend Box," a platform Kingnet launched to consolidate the fragmented ecosystem of Legend of Mir games. The analysts draw a direct comparison to Western heavyweights to illustrate the business model shift.
"Legend Box is a fast-growing game platform. Kingnet Network is developing its game platform, Legend Box. It is similar to Steam or TapTap but uniquely focuses on hardcore games. This platform was initially built for Legend games but is now being extended to other hardcore games."
The financial implications of this pivot are substantial. By moving from a single-hit game developer to a platform hosting multiple titles and social features, Kingnet creates a recurring revenue engine driven by advertising and high-margin services.
"We expect Legend Box will contribute 51%, 50% and 54% of Kingnet’s net profit in 2025e, 2026e and 2027e, respectively... Beyond that, on our base case scenario we expect Legend Box to account for 60% of Legend and other hardcore gaming market share and generate net profit of RMB 3.0 billion (US$414 million) by 2030e."
Crushing the "Private Server" Grey Market
The most compelling aspect of the report—and the one that offers the clearest path to growth—is the arbitrage opportunity in cleaning up illegal private servers. For years, the "Legend" IP has been plagued by unauthorized servers that siphon revenue away from IP holders. Kingnet is now leveraging legal IP protection to force this user base onto its legitimate platform.
HSBC notes that the sheer scale of the grey market represents massive low-hanging fruit for Kingnet:
"According to National Business Daily... private servers of Legend games have cumulatively accounted for 62% of the total market gross billings... We believe Legend Box will continue taking market share, especially from private servers, given better game quality and enhancements to IP protection."
By offering a superior product and leveraging stricter IP enforcement, Kingnet is effectively capturing revenue that already exists but was previously un-bookable. The analysts forecast that Legend Box’s coverage of the market will expand dramatically, predicting that "Legend Box will account for over 60% of Legend’s game market from 20% in 2024."
Strategic Alliances and Market Expansion
The platform isn't operating in a vacuum. Kingnet has secured strategic partnerships to ensure it controls the pipeline of content. The report highlights deep collaboration with Sheng Qu Games, the primary Legend IP holder, and Shunwang Technology, a major player in PC game services.
Furthermore, the ambition extends beyond a single genre. The platform is aggressively integrating other "hardcore" IPs to wident its net.
"We estimate that after integrating ‘Chuan Shi’, ‘Re Xue Jiang Hu’ and other hardcore genres, its total addressable market will expand to RMB 55 billion (US 7.6 billion) from RMB 40 billion (US 5.5 billion) in the medium term (2030e)."
Valuation and The Verdict
Currently trading at 16x 2026 estimated earnings, the market appears to be pricing Kingnet as a traditional developer rather than a high-margin platform operator. HSBC argues this is a mispricing of the asset's earning power.
"We think the market underestimates the earnings potential of Legend Box... We continue to use a PE to value the stock. We expect a 2025-27e net profit CAGR of 25%... above the peer average of 19%."
Consequently, HSBC has raised its target price on Kingnet Network to RMB 33.00, up from RMB 30.00. With the stock currently trading around RMB 21.43, this implies a significant 54% upside.
For investors, the signal is clear: the transition from product to platform, combined with a regulatory tailwind eliminating illegal competition, provides a robust setup for re-rating. As the grey market for hardcore games is systematically dismantled, Kingnet stands as the primary beneficiary.