巨人网络：小游戏强劲，AI游戏迭代

Investment Rating - The report maintains a "Buy" rating for the company [1][3]. Core Views - The company achieved Q3 revenue of 791 million RMB, a year-over-year decrease of 3.94% but a quarter-over-quarter increase of 8.28%. The net profit attributable to shareholders was 353 million RMB, down 16.18% year-over-year and down 3.34% quarter-over-quarter. For the first three quarters of 2024, the company reported revenue of 2.218 billion RMB, a year-over-year decrease of 2.15%, and a net profit of 1.071 billion RMB, a year-over-year decrease of 1.29% [1]. - The report highlights strong growth in the company's "Journey" series of mini-games and ongoing advancements in AI deployment, which supports the positive outlook [1][3]. Summary by Sections Financial Performance - Q3 2024 gross margin was 89.8%, a year-over-year increase of 0.2 percentage points, while the sales expense ratio rose to 35.2%, an increase of 7.5 percentage points year-over-year, primarily due to new mini-game promotions [1]. - The company expects to continue significant investment in user acquisition, leading to revised profit forecasts for 2024-2026, with net profits projected at 1.42 billion, 1.62 billion, and 1.79 billion RMB respectively [3]. Game Development - The "Journey" IP series mini-games continue to grow, with "King of Journey" maintaining a stable position in the top 10 of WeChat mini-game sales since its launch in February. The upcoming "Original Journey" mini-game is expected to increase user acquisition efforts in the second half of 2024 [2]. - The report notes the successful launch of new AI gameplay in "Space Kill," which is the first AI-native game feature based on a multi-agent large model [3]. Valuation - The target price for the company is set at 15.91 RMB, up from a previous estimate of 11.63 RMB, based on a projected 19 times PE ratio for 2025, compared to a sector average of 16 times [3].