EBSCN·2024-08-06 00:01Investment Rating - The report maintains a "Buy" rating for the company, indicating an expected investment return exceeding 15% over the next 6-12 months [7]. Core Views - The company's fundamentals are showing marginal improvement in 2024, primarily driven by better-than-expected performance in gaming and expectations of turning profitable in Q3 [1]. - The advertising business is anticipated to become a significant growth engine, with a projected 28% year-over-year increase in revenue for Q2 2024 [1]. - The new game "Three Kingdoms: Strategizing the World" is expected to contribute significantly to revenue, with initial month revenue estimates around 7.6 billion RMB [1]. Summary by Sections Revenue Forecast - Estimated Q2 2024 revenue is projected at 6.11 billion RMB, representing a 15% year-over-year increase. Revenue breakdown includes gaming at 960 million RMB (up 8%), VAS at 2.65 billion RMB (up 15%), advertising at 2.01 billion RMB (up 28%), and e-commerce at 480 million RMB (down 11%) [1]. Profitability Outlook - Expected gross profit for Q2 2024 is 1.8 billion RMB, with a gross margin of 29.5%. The adjusted net loss is anticipated to be 340 million RMB [1]. Gaming Performance - The new game "Three Kingdoms: Strategizing the World" has shown strong initial performance, ranking in the top 5 of iOS game sales shortly after its launch. The first month revenue is estimated at approximately 0.36 million USD, translating to about 7.6 billion RMB across all channels [1]. Advertising Business - The advertising revenue is expected to grow by 28% year-over-year to 2.01 billion RMB, accounting for 33% of total revenue. The number of advertisers has increased by 50% in the first half of 2024 [1]. Financial Projections - Revenue forecasts for 2024-2026 have been slightly adjusted upwards to 26.7 billion RMB, 29.7 billion RMB, and 31.9 billion RMB respectively, reflecting a 2% increase from previous estimates [1].