Investment Rating - The report maintains a "Buy" rating for the company [1] Core Views - The company is expected to achieve revenue of 49.6-50.4 billion yuan in 2024, representing a year-on-year growth of 46.3%-48.7%, and a net profit of 8.6-9.4 billion yuan, recovering from a net loss of 0.65 billion yuan in 2023, exceeding expectations [8] - The growth in revenue is driven by the successful launch of self-developed games and a rebound in TapTap's monthly active users (MAU), along with improved advertising conversion efficiency [8] - The company anticipates a significant increase in net profit in the second half of 2024, with estimates ranging from 6.09 to 6.89 billion yuan, reflecting a quarter-on-quarter growth of 143%-175% [8] - The report highlights the potential of the TapTap platform, which is expected to continue generating revenue growth through enhanced advertising capabilities and user engagement [8] Financial Summary - Total revenue for 2022 was 3.43 billion yuan, with a forecast of 5.00 billion yuan for 2024, indicating a growth rate of 47.65% [1] - The company reported a net profit of -0.55 billion yuan in 2022, with projections of 0.84 billion yuan for 2024, marking a significant turnaround [1] - The earnings per share (EPS) is expected to rise from -1.13 yuan in 2022 to 1.71 yuan in 2024 [1] - The price-to-earnings (P/E) ratio is projected to be 20.42 for 2024, decreasing to 15.99 by 2026 [1] Game Operations - The report expresses confidence in the ongoing success of self-developed games, particularly "出发吧麦芬" and "铃兰之剑," which are expected to contribute positively to revenue [8] - The company has a pipeline of new games that are anticipated to enhance performance, including "伊瑟重启日" and "仙境传说 RO：守护永恒的爱 2" [8] TapTap Platform - TapTap's advertising exposure is projected to increase by 43% year-on-year, capturing 10% of the gaming industry's advertising market [8] - The platform's value is expected to be further realized through continuous product adjustments and enhancements in user engagement [8]

Investment Rating - The investment rating for the company is maintained as "Buy" with a target price of HKD 49.10 [8][9]. Core Insights - The company is expected to achieve revenue of approximately RMB 4.96 billion to RMB 5.04 billion in 2024, representing a year-on-year increase of about 46.3% to 48.7%, which aligns with previous expectations [1][13]. - The net profit is projected to be around RMB 860 million to RMB 940 million, significantly exceeding prior expectations of RMB 610 million, marking a turnaround from losses in 2023 [1][13]. - Key drivers for the performance include strong overseas sales of self-developed games, operational leverage from TapTap's revenue growth, and effective cost management [1][13]. Summary by Sections Game Performance - The game "Heart Town" focuses on high user engagement and monetization strategies, maintaining a stable ranking around the 10th position in early 2025 [2]. - "Start Muffin" has shown impressive performance in overseas markets, with an estimated global monthly revenue of approximately RMB 70.4 million in January 2025 [2]. TapTap Platform Growth - TapTap's monthly active users (MAU) reached 43.24 million in the first half of 2024, with expectations to exceed 60 million by 2025, driven by exclusive game releases and improved user retention [3]. - The platform is expected to benefit from potential changes in Apple's policies regarding app downloads through third-party stores, which could significantly increase traffic [3]. AI Integration and Advertising - TapTap is leveraging AI for advertising, utilizing user behavior data to enhance ad targeting and reduce design time for developers [4]. Profit Forecast and Valuation - The profit forecasts for 2024-2026 have been revised upwards, with net profit estimates of RMB 900 million, RMB 1.02 billion, and RMB 1.21 billion, reflecting increases of 49.0%, 39.4%, and 44.7% respectively [5][14]. - The valuation for TapTap's business is set at a price-to-sales (PS) ratio of 6x, while the gaming business is valued at a price-to-earnings (PE) ratio of 18x, leading to a target price of HKD 49.10 [5][15].

Investment Rating - The investment rating for the company is "Buy" (maintained) [1] Core Views - The company is expected to achieve significant revenue growth in 2024, with projected revenues between 4.96 billion and 5.04 billion HKD, representing a year-on-year increase of 46.3% to 48.7%. The net profit is forecasted to be between 860 million and 940 million HKD, a turnaround from a loss of 65 million HKD in 2023. This growth is attributed to the strong performance of self-developed games and the continued growth of the TapTap platform [4][5][6] Financial Summary and Valuation Metrics - Revenue for 2024 is projected at 5,026 million HKD, with a year-on-year growth of 48.3%. The net profit is expected to be 872 million HKD, marking a significant recovery from previous losses [7] - The gross margin is anticipated to improve to 67.7% in 2024, with net margin turning positive at 17.4% [7] - Earnings per share (EPS) for 2024 is estimated at 1.8 HKD, with a price-to-earnings (P/E) ratio of 16.6 times [7] - The company’s projected net profits for 2024-2026 are 872 million, 1.286 billion, and 1.592 billion HKD respectively, with corresponding EPS of 1.8, 2.6, and 3.2 HKD [4][7]

Investment Rating - The investment rating for the company is "Buy" (maintained) [1] Core Views - The company is expected to achieve significant revenue growth in 2024, with projected revenues between 4.96 billion and 5.04 billion HKD, representing a year-on-year increase of 46.3% to 48.7%. The net profit is anticipated to be between 860 million and 940 million HKD, a turnaround from a loss of 65 million HKD in 2023. This growth is driven by the strong performance of self-developed games and the continued success of the TapTap platform [4][5][6]. Financial Summary and Valuation Metrics - Revenue for 2024 is projected at 5,026 million HKD, with a year-on-year growth of 48.3%. The net profit is expected to be 872 million HKD, marking a significant recovery from previous losses [7]. - The gross margin is forecasted to improve to 67.7% in 2024, with net margin reaching 17.4% [7]. - Earnings per share (EPS) for 2024 is estimated at 1.8 HKD, with a price-to-earnings (P/E) ratio of 16.6 times [7]. - The company’s net profit forecasts for 2024-2026 are adjusted to 872 million, 1.286 billion, and 1.592 billion HKD respectively, with corresponding EPS of 1.8, 2.6, and 3.2 HKD [4][7].

Investment Rating - The investment rating for the company is "Buy" (maintained) [5] Core Views - The company is expected to see significant revenue growth driven by the launch of new content and seasonal events in its self-developed life simulation game "Heart Town" [5] - The company maintains its profit forecasts for 2024-2026, projecting net profits of 783 million, 1.137 billion, and 1.246 billion yuan respectively, with corresponding EPS of 1.6, 2.3, and 2.5 yuan [5] - The current stock price corresponds to P/E ratios of 13.5, 9.3, and 8.5 for the years 2024, 2025, and 2026 respectively, indicating a favorable valuation [5] Financial Summary and Valuation Metrics - Revenue for 2022 was 3.431 billion yuan, with a projected increase to 6.005 billion yuan in 2024, representing a year-over-year growth of 77.2% [8] - The company reported a net loss of 554 million yuan in 2022, but is expected to achieve a net profit of 783 million yuan in 2024, marking a significant turnaround [8] - Gross margin is projected to improve from 53.5% in 2022 to 65.2% by 2026, indicating enhanced profitability [8] - The return on equity (ROE) is expected to be 31.4% in 2024, reflecting strong operational efficiency [8]

Revenue and Profitability - Revenue for the first half of 2024 reached RMB 2,220,567 thousand, a 26.7% increase from RMB 1,753,102 thousand in the same period of 2023[8]. - Adjusted EBITDA for the first half of 2024 was RMB 319.3 million, representing a 72.7% year-over-year growth[12]. - Game business revenue increased by 29.3% year-over-year, driven by the successful launch of new self-developed games[12]. - The revenue from online games was RMB 1,425.9 million, accounting for 64.2% of total revenue, compared to RMB 1,080.1 million and 61.6% in the same period last year[24]. - Total revenue for the first half of 2024 was RMB 2,220.6 million, up from RMB 1,753.1 million in the same period last year[24]. - Revenue from online games rose by 32.0% to RMB 1,425.9 million, driven by new games "GoGo Muffin" and "Sword of Convallaria"[26]. - Revenue from paid games decreased by 14.5% to RMB 55.2 million, primarily due to declines in existing paid games[26]. - Gross profit increased by 44.3% to RMB 1,496.8 million, with a gross margin of 67.4%[35]. - Net profit for the six months ended June 30, 2024, was RMB 250.6 million, compared to RMB 102.8 million for the same period in 2023, representing a year-on-year increase of 143.1%[36]. - The operating profit for the six months ended June 30, 2024, was RMB 270.5 million, up from RMB 122.7 million in the same period of 2023[37]. User Engagement and Game Development - Average monthly active users (MAU) for the TapTap China version app grew by 27.3% year-over-year, reaching 43.2 million[12]. - The new self-developed game "Heartopia" achieved over 25 million downloads in its first month after launch in July 2024[12]. - Average monthly active users for online games decreased by 28.1% to 9,534 thousand compared to 13,269 thousand in the previous year[9]. - Average monthly paying users for online games decreased by 21.4% to 1,092 thousand from 1,389 thousand in the previous year[9]. - The existing game portfolio includes 20 online games and 33 paid games as of June 30, 2024[13]. - The company continues to focus on providing high-quality games and supporting developers in creating and distributing games[12]. - "GoGo Muffin," launched in January 2024, has been well-received and is expected to expand to multiple overseas markets in the second half of 2024[14]. - The company is focusing on stabilizing its game development business and has three online games currently in development[16]. Financial Position and Investments - Cash and cash equivalents as of June 30, 2024, were RMB 2,163.5 million, down from RMB 3,206.8 million as of December 31, 2023[41]. - The debt-to-asset ratio as of June 30, 2024, was 42.9%, a decrease from 57.6% as of December 31, 2023[43]. - The company had no significant investments or acquisitions during the six months ended June 30, 2024[44]. - The company completed the acquisition of a 35% stake in X.D. GLOBAL (HK) LIMITED for an initial consideration of $21.64 million, which includes cash and shares[55]. - The company repurchased convertible bonds totaling $60.0 million during the reporting period[48]. - All outstanding convertible bonds with a principal amount of $159.6 million were redeemed by June 30, 2024[48]. Expenses and Cost Management - Total revenue cost increased by 1.1% to RMB 723.8 million, with game business costs decreasing by 1.8% to RMB 595.4 million[30][32]. - Sales and marketing expenses surged by 110.4% to RMB 695.3 million, mainly due to promotional costs for new games[35]. - R&D expenses decreased by 20.5% to RMB 419.5 million, attributed to project restructuring and a reduction in R&D personnel from 1,143 to 997[35]. - General and administrative expenses increased by 35.9% year-on-year to RMB 138.3 million for the six months ended June 30, 2024, primarily due to an increase in share-based compensation expenses of RMB 31.8 million[36]. Shareholder Information and Stock Options - As of June 30, 2024, the total number of issued shares was 480,639,093[67]. - Mr. Huang holds 157,605,000 shares, representing 32.79% of the company's total shares[63]. - Mr. Dai holds 53,545,000 shares, representing 11.14% of the company's total shares[63]. - The company has implemented a stock option plan since June 25, 2021, to incentivize and reward contributors[61]. - The stock option plan allows for a maximum of 48,043,070 shares to be issued, which is 10% of the shares in issue as of the adoption date[86]. - The total number of shares available for issuance under the stock option plan as of the report date is 47,780,636 shares, representing 9.75% of the issued shares[90]. Regulatory Compliance and Corporate Governance - The company has implemented system upgrades to prevent minors from becoming addicted to online games, in compliance with regulations in mainland China[58]. - The company has adhered to all applicable corporate governance codes, except for the separation of the roles of Chairman and CEO[57]. - The audit committee has reviewed the unaudited consolidated financial statements for the six months ending June 30, 2024[60]. Future Outlook and Strategic Plans - The company plans to release several new paid games in the second half of 2024, including "Hero's Adventure" and "Enter the Gungeon"[17]. - The company is focusing on market expansion, with plans to increase its presence in key regions, aiming for a 20% growth in user base by the end of 2024[97]. - Research and development efforts are being intensified, with an investment of 1,509,315 million allocated for new technologies and product innovations[97]. - The company has outlined a strategic plan for potential acquisitions to enhance its market position, targeting a 15% increase in market share by 2025[97].

Investment Rating - Maintain "Buy" rating with a target price of HKD 22 [3] Core Views - The company's 1H24 revenue reached RMB 2.22 billion, a YoY increase of 26.7%, with gross margin improving by 8.2pp to 67.4% due to higher self-developed game revenue contribution [2] - Adjusted net profit was RMB 240 million, with an adjusted net margin of 10.7%, and adjusted EBITDA grew by 72.7% YoY to RMB 320 million [2] - Game business revenue increased by 29.3% YoY to RMB 1.49 billion, driven by strong performance of new games such as "Let's Go Muffin" and "Sword of Linlang" [2] - TapTap platform revenue grew by 32.6% YoY to RMB 1.30 billion, with monthly active users (MAU) in China reaching 43.24 million, a YoY increase of 27.3% [2] - The company expects strong growth in game revenue in 2H24 due to the successful launch of new games and the upcoming release of "Let's Go Muffin" in South Korea and Japan [2] Financial Projections - Revenue for 2024E/2025E is projected to be RMB 5.0 billion/RMB 5.3 billion, with adjusted net profit of RMB 570 million/RMB 650 million [3] - The target price of HKD 22 implies a 2024E/2025E P/E of 17.0x/14.7x [3] Game Performance - "Let's Go Muffin" became the top revenue contributor in 1H24 after its launch in Hong Kong, Macau, Taiwan, and mainland China, with plans for expansion into South Korea and Japan [2] - "Heartbeat Town" achieved over 25 million downloads in its first month and is expected to become a product with millions of daily active users (DAU) [2] TapTap Platform - TapTap's user base rebounded, with MAU in China growing by 27.3% YoY and 14.8% QoQ, driven by increased marketing and the launch of popular games [2] - The company has limited ad load rates to improve user experience, which may slightly impact short-term ad revenue growth, but double-digit growth is still expected in 2H24 [2]

Investment Rating - Maintain "Buy" rating [4] Core Views - The company achieved significant growth in revenue and net profit in H1 2024, driven by new game launches and rapid user growth on the TapTap platform [2][3] - The company's self-developed games, such as "Let's Go Muffin" and "Sword of Linlan," contributed to the revenue growth, while TapTap's user base expanded significantly [3] - The company is focusing on cost reduction and efficiency improvement, with plans to further enhance commercialization and expand its game portfolio [4] Financial Performance - Revenue in H1 2024 reached RMB 2,221 million, a YoY increase of 26.7% [2] - Net profit attributable to shareholders was RMB 205 million, a YoY increase of 127.4% [2] - Gross profit was RMB 1,497 million, with a gross margin of 67.4%, up 8.2 percentage points YoY [2] - Sales and R&D expense ratios were 31.31% and 18.89%, respectively, with sales expenses increasing due to marketing and advertising costs for new games and TapTap [2] Business Segments - Game business revenue reached RMB 1,486 million, a YoY increase of 29.3%, driven by online game revenue growth of 32.0% [3] - Information services revenue was RMB 734 million, a YoY increase of 21.7%, supported by TapTap's user growth [3] - TapTap China's average MAU grew by 27.3% YoY to 43.2 million, benefiting from the launch of "Let's Go Muffin" and other games [3] Future Outlook - The company plans to launch "Let's Go Muffin" in multiple overseas markets in H2 2024 [3] - Three games are currently in development, with "Let's Go Muffin" and "Sword of Linlan" expected to drive future growth [3] - The company is preparing to launch AIGC service TapSight to enhance customer service capabilities [3] Valuation and Forecast - Estimated net profit for 2024-2026 is RMB 608 million, RMB 768 million, and RMB 938 million, respectively [4] - EPS for 2024-2026 is projected to be RMB 1.26, RMB 1.60, and RMB 1.95 per share, with P/E ratios of 14x, 11x, and 9x, respectively [4] Market Data - 52-week high/low price: HKD 23.80/7.47 [6] - Total market capitalization: HKD 9,469.14 million [6]

Investment Rating - The investment rating for the company is "Buy" (maintained) [2] Core Views - The company has shown significant growth in H1 2024, with revenue reaching 2.221 billion HKD (up 26.7% year-on-year) and net profit of 205 million HKD (up 127.4% year-on-year). The adjusted net profit was 237 million HKD (up 110% year-on-year). This growth is attributed to new games and increased user engagement on TapTap [4] - The company maintains its profit forecasts for 2024-2026, expecting net profits of 783 million HKD, 1.137 billion HKD, and 1.246 billion HKD respectively, with corresponding EPS of 1.6, 2.4, and 2.6 HKD. The current stock price corresponds to PE ratios of 11.1, 7.6, and 7.0 times for the respective years [4] Summary by Sections Financial Performance - In H1 2024, the company achieved a revenue of 2.221 billion HKD, with a year-on-year increase of 26.7%. The game business revenue grew to 1.486 billion HKD (up 29.3% year-on-year), driven by new games such as "Starting Muffin" and "Sword of Lily" [4] - TapTap's revenue reached 734 million HKD (up 21.7% year-on-year), benefiting from increased monthly active users and demand from game advertisers [4] Game Launches and Contributions - "Starting Muffin" became the largest revenue contributor in H1 2024, with overseas revenue of 618 million HKD (up 65% year-on-year). The game was launched in mainland China on May 15, 2024, and is expected to contribute to revenue growth in the second half of the year [5] - New games such as "Heart Town" and the international version of "Sword of Lily" are expected to continue driving performance growth [5] User Growth and TapTap Platform - TapTap's monthly active users reached 43.24 million (up 27.3% year-on-year), primarily due to the launch of several major new games. The platform's user base is expected to continue growing with the release of new titles [6] - The company limited ad loading rates in H1 2024 to enhance user experience, which is expected to support long-term growth and monetization potential for the platform [6]

Financial Performance - Revenue for the six months ended June 30, 2024, reached RMB 2,220,567 thousand, a 26.7% increase from RMB 1,753,102 thousand in the same period of 2023[2] - Gross profit for the same period was RMB 1,496,811 thousand, reflecting a 44.3% increase compared to RMB 1,037,261 thousand in 2023[2] - Adjusted profit for the period was RMB 278,811 thousand, up 115.1% from RMB 129,647 thousand year-on-year[2] - Net profit for the six months ended June 30, 2024, was RMB 250.6 million, compared to RMB 102.8 million for the same period in 2023[31] - The company's operating profit for the six months ended June 30, 2024, was RMB 270.5 million, significantly higher than RMB 122.7 million in the previous year[32] - The adjusted EBITDA for the six months ended June 30, 2024, was RMB 319.3 million, up from RMB 184.8 million in the previous year[32] - Profit attributable to equity holders for the six months ended June 30, 2024, was RMB 237,290 thousand, up 110.0% from RMB 112,979 thousand in the same period of 2023[35] - Basic and diluted earnings per share for the six months ended June 30, 2024, were both RMB 0.43, compared to RMB 0.19 in the same period of 2023[42] User Engagement - Average monthly active users (MAU) for online games decreased by 28.1% to 9,534 thousand from 13,269 thousand in the previous year[3] - Average monthly paying users (MPU) for online games fell by 21.4% to 1,092 thousand from 1,389 thousand in the same period last year[3] - TapTap's average MAU for the Chinese version increased by 27.3% to 43,242 thousand, recovering from a decline in 2023[5] - The average monthly active users (MAU) for TapTap's international version decreased by 29.0% year-on-year to 5.1 million, mainly due to a significant drop in users from India[14] Game Business Performance - The new self-developed game "GoGo Muffin" launched in January and May 2024 contributed to a 29.3% increase in game business revenue year-on-year[5] - As of June 30, 2024, the company's game business revenue increased by 29.3% year-on-year to RMB 1,486.3 million[17] - Revenue from online games rose by 32.0% year-on-year to RMB 1,425.9 million, driven by new game launches such as "GoGo Muffin" and "Sword of Convallaria"[17] - Revenue from paid games decreased by 14.5% year-on-year to RMB 55.2 million, primarily due to declines in existing titles[17] - The game "Heartopia" achieved over 25 million downloads in its first month after launch in July 2024[5] - The company maintains a portfolio of 20 online games and 33 paid games as of June 30, 2024[6] Expenses and Costs - Sales and marketing expenses rose by 110.4% to RMB 695.3 million, primarily due to promotional costs for new games and increased marketing expenses for the TapTap platform[26] - Research and development expenses decreased by 20.5% to RMB 419.5 million, attributed to project restructuring and a reduction in the number of R&D personnel from 1,143 to 997[27] - General and administrative expenses increased by 35.9% to RMB 138.3 million, mainly due to an increase in share-based compensation expenses[28] - The cost of revenue increased by 1.1% year-on-year to RMB 723.8 million as of June 30, 2024[20] Revenue Breakdown - Revenue from the TapTap platform segment accounted for 15% of total revenue in the six months ended June 30, 2024, down from 19% in the same period of 2023[54] - The revenue from online marketing services for the six months ended June 30, 2024, was RMB 1,144,657 thousand, compared to RMB 890,848 thousand for the same period in 2023, indicating a growth of approximately 28.5%[52] - Revenue from mainland China was RMB 862,829 thousand, up from RMB 769,973 thousand, reflecting an increase of 12.0%[56] - Revenue from other regions increased significantly to RMB 618,245 thousand, compared to RMB 374,684 thousand, marking a 65.0% growth[56] Financial Position - The company's cash and cash equivalents decreased to RMB 2,163,500 thousand as of June 30, 2024, down from RMB 3,206,821 thousand as of December 31, 2023[36] - The company's debt-to-asset ratio improved to 42.9% as of June 30, 2024, compared to 57.6% as of December 31, 2023[38] - The total liabilities decreased to RMB 1,449,165 thousand as of June 30, 2024, down from RMB 2,540,691 thousand as of December 31, 2023, indicating a reduction of approximately 43%[44] - The total equity amounted to RMB 1,930,993 thousand, an increase from RMB 1,868,751 thousand as of December 31, 2023, representing a growth of approximately 3.32%[44] Corporate Governance and Strategy - The company complied with all applicable provisions of the Corporate Governance Code during the six months ended June 30, 2024, except for the separation of the roles of Chairman and CEO[83] - The board of directors consists of executive directors Huang Yimeng, Dai Yunjie, and Fan Shuying; non-executive director Wu Meng; and independent non-executive directors Pei Dapeng, Xin Quandong, and Liu Qianli[90] - The company is focused on ensuring the accuracy of information and providing strategic advice for investment and corporate decisions[90] - The company aims to maintain transparency and accountability in its financial reporting and communications[90] - Future outlook and performance guidance will be provided to stakeholders to align expectations[90] Future Plans - The company plans to leverage generative AI service TapSight to enhance user service capabilities in the future[5] - The company plans to release more paid games on multiple platforms in the second half of 2024, including "Hero's Adventure" and "Enter the Gungeon" mobile versions[11] - The company plans to reinvest retained earnings of RMB 1,541 million for further business expansion in China[65] - New product and technology development are key areas of focus for the company moving forward[90]