SANQI HUYU(SZ:002555) Changjiang Securities·2025-05-02 08:13Investment Rating - The investment rating for the company is "Buy" and is maintained [6]. Core Views - In Q1 2025, the company achieved revenue of 4.243 billion yuan, a year-on-year decrease of 10.67% but a quarter-on-quarter increase of 3.45%. The net profit attributable to the parent company was 549 million yuan, down 10.87% year-on-year and down 29.19% quarter-on-quarter. The net profit excluding non-recurring items was 536 million yuan, a year-on-year decrease of 12.90% and a quarter-on-quarter decrease of 24.90% [2][4]. - The performance of several new games, such as "Time Explosion" and "Heroes Don't Flash," has been strong, driving a quarter-on-quarter revenue increase. However, the revenue declined year-on-year due to the natural decline in existing game revenue and a high base effect. Increased expenses from new game launches have led to a decline in performance, and future attention will be on the recovery of initial investments [2][4]. - The company has a rich pipeline of upcoming products, and attention should be paid to the testing and launch progress of key new games [2][4]. Summary by Sections Financial Performance - In Q1 2025, the company reported revenue of 4.243 billion yuan, a year-on-year decline of 10.67% and a quarter-on-quarter increase of 3.45%. The net profit attributable to the parent company was 549 million yuan, down 10.87% year-on-year and down 29.19% quarter-on-quarter. The net profit excluding non-recurring items was 536 million yuan, a year-on-year decrease of 12.90% and a quarter-on-quarter decrease of 24.90% [2][4]. New Game Performance - Several new games launched in early 2025, including "Time Explosion" and "Heroes Don't Flash," have shown strong performance, with "Time Explosion" ranking in the top 4 of the WeChat mini-game sales list and "Heroes Don't Flash" entering the top 5 of the iOS sales list [2][4]. - The increase in sales expenses due to new game promotions has led to a sales expense ratio of 57% in Q1 2025, resulting in temporary losses for the issuing entities of these new games. As the initial investments for these new games are recovered, profit margins are expected to improve [2][4]. Product Pipeline - The company has a diverse pipeline of new games, including MMORPG, SLG, card games, and simulation management genres, which may continue to contribute to revenue growth. Notable upcoming titles include "Douluo Dalu: Hunting Soul World" and "Zhui Xu," which have already received approval for release [2][4]. - The company expects net profits attributable to the parent company to be 2.84 billion yuan and 3.09 billion yuan for 2025 and 2026, respectively, corresponding to PE ratios of 11.8 and 10.9 times [2][4].