2024-06-28 00:01Investment Rating - The report maintains a "Buy" rating for the company [4][21]. Core Views - The launch of the mobile game "Naraka: Bladepoint" on July 25 is expected to drive significant growth in the mobile gaming sector, with over 30 million pre-registrations [1]. - The company is projected to achieve mobile game revenues of 2 billion RMB in Q3 and 4.4 billion RMB in 2024, contributing 8% and 5% to total mobile revenue respectively [1]. - Despite a slowdown in mobile game growth and adjustments in PC games, the current stock price reflects these challenges, indicating potential for valuation recovery in the second half of 2024 [2]. - The anticipated recovery in PC game revenue and the new mobile game launch enhances the certainty of revenue growth [3]. Financial Projections - The company expects a 15% year-on-year increase in mobile game revenue for Q2, with a slight decline of 9% quarter-on-quarter due to seasonal factors [7]. - For the full year, mobile game revenue is projected to grow by 13% [7]. - Revenue forecasts for the upcoming years are as follows: - 2024: 110.16 billion RMB (6.5% growth) - 2025: 121.36 billion RMB (10.2% growth) - 2026: 132.49 billion RMB (9.2% growth) [8]. - Net profit is expected to reach 33.02 billion RMB in 2024, with a slight increase to 35.84 billion RMB in 2025 [8]. Market Performance - The company's stock closed at 96.74 USD, with a target price of 117.00 USD, indicating a potential upside of 20.9% [3][21]. - The stock has shown a year-to-date change of 3.84% [5]. Game Revenue Breakdown - The breakdown of game revenue for Q2 2024 is as follows: - Total revenue: 25.11 billion RMB - Mobile games: 14.54 billion RMB - PC games: 4.07 billion RMB [18]. Valuation Metrics - The report suggests that the current valuation is below the industry average, with a projected P/E ratio of 18 times for the gaming business in 2024 [2]. - The company’s market capitalization is approximately 120.26 billion USD [5]. Conclusion - The report emphasizes the positive outlook for the company driven by new game launches and expected recovery in revenue, supporting the "Buy" rating [2][3].