NETDRAGON(HK:00777) BOCOM International·2025-04-02 08:00Investment Rating - The investment rating for the company is downgraded to Neutral with a target price reduced from HKD 14.00 to HKD 10.20, indicating a potential downside of 2.7% [2][3][11]. Core Insights - The company's performance in the short term is under pressure, particularly in its gaming and education segments, with revenue growth facing uncertainties. The AI+ strategy is expected to optimize operational costs, but short-term profits may still decline. The focus is on the improvement of the education market in Europe and the US, as well as the anticipated recovery in gaming revenue in the second half of the year [2][7][8]. Financial Performance Summary - 2024 Performance: Total revenue is projected to decline by 15% year-on-year to RMB 6,047 million, with gaming and Mynd.ai revenues expected to decrease by 6% and 28% respectively. Adjusted net profit is forecasted to drop by 25% to RMB 718 million [7][8]. - 2025 Forecast: Revenue is expected to further decline to RMB 5,241 million, with gaming revenue at RMB 3,555 million and Mynd.ai at RMB 1,685 million, reflecting a 26% reduction in both segments. Adjusted net profit is anticipated to be RMB 530 million, a 56% decrease [6][14]. - Profitability Metrics: The adjusted operating profit margin is projected to decrease significantly from 19.1% in 2024 to 11.0% in 2025, while the adjusted net profit margin is expected to drop from 16.9% to 10.1% [6][14]. Market Position and Trends - The company is navigating a challenging environment, with strategic adjustments in its gaming operations and a focus on cost reduction to mitigate profit pressures. The anticipated launch of new games in the second half of 2025 is expected to support a recovery in gaming revenue [2][7][8].