Group 1 - Hong Kong mobile game stocks experienced a significant afternoon rally, with Bilibili (09626.HK) rising over 10% [1] - NetDragon (00777.HK) saw an increase of more than 4% [1] - Both Xindong Company (02400.HK) and NetEase (09999.HK) each rose by over 2.5% [1]

Investment Rating - The report maintains a "Strong Buy" investment rating for the company [2][5]. Core Views - The new game "Ethereal Reboot Day" has launched its international version on June 5, and the overall performance of older games remains stable. The company is expected to compensate for the natural decline in revenue from older games with new game launches, leading to a high degree of certainty in overall growth this year [1][5]. - The company has a robust pipeline of self-developed games, with significant contributions expected from titles like "Let's Go Muffin" and "Heart Town" in 2025, alongside several upcoming releases [5][6]. - The TapTap platform continues to expand, with a record high of 44 million monthly active users (MAU) in 2024, and revenue growth to 1.578 billion yuan. The platform's unique "no cooperation & zero revenue sharing" principle has attracted many developers [5][6]. - Financial projections indicate that the company's revenue is expected to reach 5.393 billion yuan in 2025, with a net profit of 1.027 billion yuan, reflecting a 27% year-on-year growth [6][8]. Summary by Sections Financial Data and Valuation - Total revenue for 2023 is projected at 3.389 billion yuan, with a significant increase to 5.012 billion yuan in 2024, and further growth to 5.393 billion yuan in 2025, representing a year-on-year growth of 48% and 8% respectively [6][8]. - The company is expected to achieve a net profit of 1.027 billion yuan in 2025, with a corresponding PE ratio of 17.2x [6][8]. - The gross margin is projected to improve from 61.0% in 2023 to 71.5% in 2025, indicating enhanced profitability [8]. Key Financial Ratios - The company's return on equity (ROE) is expected to be 30.7% in 2025, down from 32.3% in 2024, but still reflecting strong profitability [8]. - The debt-to-asset ratio is projected to decrease from 30.8% in 2024 to 25.3% in 2025, indicating improved financial stability [8]. - The current ratio is expected to rise from 3.1 in 2024 to 3.8 in 2025, suggesting better liquidity [8].

Core Insights - The gaming companies in Shanghai appear to be recovering, signaling a potential new phase for the industry [1][26] Group 1: Company Performance - Eagle's new game "Pom Pom" has achieved significant success, ranking Top 3 in China and Top 10 globally on Steam with an 88% approval rating [1][2][3] - Paper Games has seen a remarkable turnaround, with its flagship store topping the sales chart on Tmall during the "618" shopping festival [5][6] - The game "Love and Deep Space" has shown strong performance, with projected revenue exceeding 6 billion yuan across all platforms in 2024 [6][7] - Heartbeat Games has reported a nearly 70% year-on-year revenue increase, reaching 3.3 billion yuan in 2024, driven by successful titles [10][12] Group 2: Industry Trends - The gaming industry in Shanghai is experiencing a collective improvement, which may indicate the beginning of a recovery cycle [26] - Despite the positive trends, many companies remain cautious regarding project launches and hiring, with a significant oversupply of talent in the job market [24][25] - The past two years saw a wave of layoffs and project cancellations across the industry, but the current signs of recovery suggest a potential shift in the market dynamics [23][26]

Market Performance - Jinli Permanent Magnet (06680) rose over 17% due to significant increases in overseas medium and heavy rare earth prices, which are expected to gradually transmit to the domestic market [1] - Zhixing Technology (01274) increased over 3% after securing a platform-based logistics vehicle contract with a leading domestic brand [1] - Weimeng Group (02013) surged over 9% as its upgraded Weimeng Guide Agent product is anticipated to benefit from the growth of WeChat e-commerce [1] - Zhaoke Ophthalmology-B (06622) gained over 8% following FDA approval for a new drug trial application for cyclosporine eye gel [1] - Zai Ding Pharmaceutical (09688) rose over 5% after reporting excellent data from the low-dose group of ZL-1310 [1] - Lianlian Digital (02598) saw a mid-session increase of over 5% as it partnered with BVNK to provide stablecoin payment solutions for its merchants [1] - Reading Group (00772) increased over 7% after acquiring a 26.67% stake in Yihua Kaitian, with its IP+AI strategy expected to unlock more value [1] - NIO opened nearly 4% higher, projecting a year-on-year revenue growth of 11.8%-15% for Q2 [1] - Kuaishou-W (01024) rose over 6% as its Kecing AI recently launched a new 2.1 series model, with institutions optimistic about its profitability [1] - Meituan (03690) surged over 3%, reaching a nearly two-month high, with southbound funds continuing to accumulate for 13 consecutive days [1] US Market Highlights - Applied Digital (APLD.US), a stock related to Nvidia, surged nearly 30%, with a 94% increase over three trading days, as long-term contracts are expected to generate $7 billion in revenue [2] - Tesla (TSLA.US) fell 3.55% due to declines in both the Chinese and European automotive markets, with a 15% year-on-year drop in China's May wholesale sales of new energy passenger vehicles [2] - MongoDB (MDB.US) saw a nearly 15% increase in after-hours trading following better-than-expected Q1 results and an $800 million stock buyback plan [2] - Broadcom (AVGO.US) rose over 3% before earnings, reaching a new historical high, with Morgan Stanley stating that AI is operating at full speed, expecting strong Q2 results [3] - Meta increased over 3% as it was reported to be accelerating the development of ultra-lightweight open-headset projects [3] - Guidewire Software (GWRE.US) surged over 16% after exceeding Q3 earnings expectations and raising its guidance [3] - Dollar Tree (DLTR.US) fell over 8% after warning of potential 50% declines in adjusted earnings due to tariffs and weak consumer spending [3] - STMicroelectronics (STM.US) rose nearly 11% amid reports that Italy and France are considering splitting its joint management rights [3]

Core Viewpoint - The Hong Kong stock market, particularly the internet sector, has shown strong performance with significant inflows and positive investor sentiment, driven by technological advancements and recovery from previous market shocks [4][5]. Group 1: Market Performance - As of June 5, 2025, the CSI Hong Kong Internet Index rose by 1.43%, with notable gains from companies like Heartbeat (5.01%) and Kingsoft Cloud (3.68%) [3]. - The Hong Kong Internet ETF has seen a 39.38% increase in net value over the past year, ranking 143 out of 2831 equity funds [5]. - The ETF has achieved a maximum monthly return of 30.31% since its inception, with a historical one-year profit probability of 100% [5]. Group 2: Fund Characteristics - The management fee for the Hong Kong Internet ETF is 0.50%, and the custody fee is 0.10%, which are among the lowest in comparable funds [7]. - The ETF's tracking error over the past three months is 0.022%, indicating high tracking precision [7]. - The latest price-to-earnings ratio (PE-TTM) for the index tracked by the ETF is 21.93, which is below 89.02% of the historical data over the past year, suggesting a low valuation [7]. Group 3: Major Holdings - The top ten weighted stocks in the CSI Hong Kong Internet Index account for 77.23% of the index, with Alibaba (18.49%), Xiaomi (15.72%), and Tencent (14.90%) being the most significant contributors [7][9]. - Other notable companies in the top ten include Meituan, Kingdee International, and Kuaishou, reflecting a diverse representation within the internet sector [9].

Group 1 - The core viewpoint is that instead of completely blocking minors from electronic devices, it is more effective to guide them positively and enhance content selection and cognitive protection [1] - The use of electronic devices for educational tasks has expanded the "reasonable space" for children, but it also raises concerns about prolonged exposure to unrelated content [1] - There is a concern about the impact of short video products on minors' thinking, as they often present information in a compressed manner that can lead to cognitive biases [1] Group 2 - The spread of "black language" among teenagers is noted, with unregulated language from live-streamers and short video creators affecting children's language expression [2] - The mobile gaming platform TapTap launched a "minor mode" in 2023, allowing parents to manage content recommendations, download permissions, and time control [2] - TapTap has implemented over 100 protective strategies for minors since 2022, with a curated content pool of over 2,000 games and daily processing of over 3,000 potentially harmful content items [2] Group 3 - Game companies are encouraged to consider the design phase to avoid exploiting human weaknesses, particularly in creating inducements for low-age users [3] - Reducing excessive in-game purchases and daily check-in mechanisms is essential for establishing a positive interaction between game manufacturers, guardians, and minors [3]

Group 1 - The Hong Kong mobile gaming stocks are experiencing a strong upward trend, with Zhongyou Mobile (00302.HK) rising over 15% [1] - Boyaa Interactive (00434.HK) has increased by more than 12% [1] - Other companies such as Bilibili (09626.HK) and Xindong Company (02400.HK) are also seeing gains [1]

Group 1: Company Performance - NetEase reported a strong Q1 financial performance, with game and related value-added service revenue reaching 24 billion yuan, a year-on-year increase of 12.1%, accounting for 83.2% of total revenue [1] - The gaming sector continued its upward trend, with listed companies in the gaming sector achieving a total revenue of 26.72 billion yuan in Q1, a year-on-year growth of 22%, and a net profit of 3.48 billion yuan, up 47% [1] - Jiuhua Tong achieved a revenue of 8.145 billion yuan in Q1 2025, a year-on-year increase of 91.12%, with a net profit of 1.346 billion yuan, up 107.95%, significantly outperforming the industry average [4] Group 2: Industry Trends - The gaming industry is experiencing a recovery growth trend, with the issuance of game licenses and the launch of new products contributing to this resurgence [3] - The Chinese gaming market generated a revenue of 85.704 billion yuan in Q1 2025, a year-on-year increase of 17.99%, with overseas sales of self-developed games reaching 4.805 billion USD, up 17.92% [4] - The mobile gaming market accounted for nearly 74% of the overall market, with mobile game revenue reaching 63.626 billion yuan, a year-on-year increase of 20.29%, while client games also showed growth with a revenue of 17.919 billion yuan, up 6.85% [5] Group 3: Game Development and Innovation - Companies are focusing on long-term operation of existing games, with innovative gameplay and continuous content updates maintaining user engagement, as seen with titles like "Sausage Party" and "Aobi Island" [5] - The first domestic AAA single-player game "Black Myth: Wukong" has increased interest in console games, prompting companies like Light Media to invest in AAA game development [6] - AI technology is being integrated into game design and development, with companies like Zhongyou Mobile deploying AI models to enhance gameplay and user interaction [7] Group 4: Future Outlook - The gaming industry is expected to see accelerated growth due to the introduction of key products and the adoption of new technologies such as 5G-A and XR devices, which may enhance performance and valuation [9] - The trend of "going global" for Chinese games is gaining momentum, with companies actively expanding their overseas markets and achieving significant revenue growth [4][8]

Summary of the Conference Call for Xindong Company Company Overview - Xindong Company primarily consists of two business segments: TapTap platform (game community and distribution channel, approximately 30% of revenue) and game business (approximately 70% of revenue) [2][4] Key Points and Arguments - In 2024, Xindong Company launched two core games, "Start Your Adventure, Muffin" and "Xindong Town," which exceeded expectations. "Start Your Adventure, Muffin" generated total revenue of 1.6 billion RMB, with confirmed income of about 1.5 billion RMB; "Xindong Town" confirmed revenue of less than 300 million RMB by year-end, with a total revenue of approximately 400 million RMB [2][7] - The success of "Start Your Adventure, Muffin" is attributed to its casual gameplay and social attributes, which reduced player churn, showcasing the company's experience in developing team-based idle games [2][10] - In 2025, "Start Your Adventure, Muffin" underperformed in the Japanese market, and the domestic version faces downward pressure, while "Xindong Town" is expected to contribute an additional 300-400 million RMB domestically, potentially offsetting overall declines [2][12][13] - Older games like "Sausage Party" are expected to see a natural decline of about 10%, while "Bellflower Sword" may see a 50% drop in revenue. However, "Torchlight" is expected to exceed last year's revenue of 300 million RMB due to shortened season cycles and content updates [2][12] Financial Performance - Xindong Company's 2024 financial performance met market expectations, but stock prices fell due to discrepancies between operational data and market forecasts. Future game revenue may show fluctuations, presenting investment opportunities [3] - TapTap platform's monthly active users (MAU) were approximately 44 million in 2024, with expectations for double-digit revenue growth in 2025 and profit margins increasing from 25% in 2024 to around 30% in 2025, potentially yielding profits of 500 million RMB or more [5][28] Market and Valuation Insights - TapTap platform's MAU showed resilience despite a decline in advertising investment. The company experienced a valuation and performance downturn but saw a recovery in 2024 due to a strong product cycle [6] - The valuation for Xindong Company is projected between 14 billion to 20 billion RMB, with a PE ratio of 10 to 15 times, depending on the performance of new games like "Ise" [30] Future Game Releases and Expectations - The new game "Ise" is expected to launch in June 2025, with revenue contributions estimated at 300 million RMB if performance is average, and up to 1 billion RMB if successful [5][16] - Xindong Company plans to continue expanding its self-developed team, currently consisting of over 700 members, and aims to launch one to two new projects in 2025 [19][20] Additional Considerations - The company is focusing on enhancing user engagement on the TapTap platform, with strategies to improve user stickiness and maintain a balance between ad loading rates and user growth [26] - The overall game business is expected to grow by 20% in 2025, with a stable profit margin projected between 60% to 65% [29] This summary encapsulates the key insights and projections regarding Xindong Company and its operational landscape, highlighting both opportunities and challenges in the gaming industry.

Financial Performance - The company's total revenue for the year exceeded RMB 5 billion, representing a year-on-year growth of nearly 50%[7]. - The net profit attributable to the parent company reached RMB 811 million, marking the first annual profit in five years[7]. - For the year ended December 31, 2024, the company's gaming business revenue increased by 64.2% to RMB 3,434.1 million, compared to RMB 2,091.7 million in 2023[32]. - Revenue from online games rose by 69.1% to RMB 3,316.8 million, driven by new game launches including "GoGo Muffin," "Sword of Convallaria," and "Heartopia"[32]. - The net profit for the year ended December 31, 2024, was RMB 890.5 million, compared to a net loss of RMB 65.4 million for the year ended December 31, 2023[46]. - The operating profit for the year ended December 31, 2024, was RMB 914.8 million, a significant improvement from an operating loss of RMB 5.2 million in 2023[49]. - The EBITDA for the year ended December 31, 2024, was RMB 997.2 million, compared to RMB 107.0 million in 2023[49]. - The total liabilities to total assets ratio as of December 31, 2024, was 30.8%, a decrease from 57.6% as of December 31, 2023[53]. Game Development and Performance - The game "GoGo Muffin" launched globally and achieved significant profits, indicating a successful start for the company's publishing business[8]. - The game "Heartopia" surpassed 20 million downloads on the TapTap platform shortly after its launch, highlighting strong player demand for life simulation games[8]. - The re-release of "Ragnarok M: Eternal Love" in Southeast Asia and Taiwan received positive feedback, reaffirming the game's enduring popularity[9]. - The company plans to develop a sequel, "Ragnarok M: Eternal Love II," aiming to create a fully 3D open world experience[10]. - "Torchlight: Infinite" has seen gradual performance improvements since last year, with core player recognition increasing, indicating a growing brand presence in the action RPG genre[10]. - Over half of the core players of "Torchlight: Infinite" are now PC users, reflecting the game's acceptance among core PC gamers[11]. - The upcoming game "Etheria," developed using Unreal Engine, represents a significant advancement in the company's production capabilities[11]. - The company aims to differentiate its products in a competitive market while expanding its game portfolio through global testing and feedback[11]. TapTap Platform Performance - TapTap's game business revenue increased by 64.2% year-over-year, driven by new self-developed games such as "GoGo Muffin," "Sword of Convallaria," and "Heartopia"[20]. - The average monthly active users (MAU) of the TapTap China app grew by 23.0% year-over-year, reaching 44.0 million[20]. - The TapTap platform's revenue increased by 21.6% to RMB 1,578.0 million, correlating with a 23.0% increase in average monthly active users to 44.0 million[35]. - The TapTap international version app's average MAU decreased by 13.0% year-over-year to 5.0 million, primarily due to a significant drop in users from India and reduced overseas marketing expenditures[29]. AI and Technology Integration - TapTap successfully promoted games using AI recommendation technology, enhancing user acquisition and promotion efficiency[12]. - The company plans to launch a PC version of TapTap, maintaining a no-revenue-sharing model, allowing developers to retain 100% of their income[15]. - TapTap has integrated AI tools into daily operations and is exploring new business development directions leveraging AI and machine learning[20]. - The company has completed the filing for its generative AI service, TapSight, and added AI Q&A and DeepSeek search functionalities to TapTap[20]. - The company is optimistic about the future of AI technology in game development, anticipating significant reductions in development costs[16]. Corporate Governance and Management - The company has a strong governance structure with independent non-executive directors possessing extensive industry experience[67][68][69][70]. - The board consists of three executive directors, one non-executive director, and three independent non-executive directors, ensuring strong independence[78]. - The company aims to maintain at least 10% female representation on the board and is committed to improving gender diversity in senior management roles[84]. - The board has a diversity policy that considers various factors such as professional experience, skills, and educational background for appointments[83]. - The company has adopted a corporate governance code and has complied with all applicable provisions as of December 31, 2024[73]. Employee and Workplace Policies - The company has a zero-tolerance policy towards workplace harassment and discrimination, ensuring fair opportunities for all employees[193]. - The employee compensation system includes base salary, allowances, performance bonuses, year-end bonuses, and stock options to maintain market competitiveness[199]. - The company provides social insurance benefits, including pension, medical, maternity, work injury, unemployment insurance, and housing fund, along with various subsidies[199]. - The company emphasizes the urgency of preventing accidents and has taken proactive measures to enhance workplace safety[200]. - The overall employee turnover rate for 2024 is 20.86%, with male turnover at 21.32% and female turnover at 19.77%[198]. Environmental, Social, and Governance (ESG) Initiatives - The company is committed to reviewing and monitoring its policies and practices regarding significant ESG matters to ensure compliance with legal and regulatory requirements[98]. - The board of directors is responsible for overseeing ESG matters and has established a five-tier governance structure to manage these issues effectively[144]. - The company has set environmental goals and is continuously assessing and managing ESG issues, with plans to establish quantitative targets and benchmarks[144]. - The company promotes community harmony and public welfare through various activities, including volunteer work and social participation[151]. - The company has established a charity organization named "Heartfelt" to support community activities, donating a total of 1,841.79 yuan to "Baby Home" this year[190]. Intellectual Property and Innovation - The company has seen a 400% year-on-year increase in overseas intellectual property applications and a 340% increase in domestic applications, reflecting a significant expansion in its IP protection efforts[167]. - The number of invention patent authorizations has increased by 200% year-on-year, while design patent authorizations have risen by 150%, indicating a strong focus on innovation[167]. - The total number of intellectual property rights held by the company is 2,448, including 1,557 trademarks, 25 patents, and 247 software copyrights[169]. - The company has established a clear process for intellectual property registration, providing employees with incentives for innovation and patent applications[167]. Customer Engagement and Satisfaction - The group received a total of 26 complaints this year, achieving a complaint response rate and handling rate of 100%, with a player satisfaction rate of 99.92%[181]. - The group has established multiple communication channels, including a 24-hour customer service system and self-developed tools like Tapdesk, enhancing user satisfaction and problem resolution rates[179]. - The group evaluated 382 suppliers this year, ensuring compliance with anti-bribery clauses and promoting sustainable practices in procurement[184].