HTSC·2025-05-18 10:45Investment Rating - The report maintains a "Buy" rating for the company [7][26]. Core Insights - The company's total revenue for Q1 2025 increased by 7% year-on-year to 28.8 billion RMB, exceeding consensus expectations by 1% [1]. - Game and value-added services revenue grew by 12% year-on-year to 24 billion RMB, with PC game revenue significantly outperforming expectations, increasing by 85% year-on-year [1][2]. - The adjusted net profit attributable to shareholders rose by 32% year-on-year to 11.2 billion RMB, surpassing expectations by 19% due to improved expense management [1][4]. Revenue and Profitability - The company expects Q2 and full-year 2025 PC game revenue to grow by 60% and 40% year-on-year, respectively [1]. - The gross margin for game and value-added services improved to 68.8%, driven by the high margin of new game releases [1][4]. - The adjusted net profit forecast for 2025 has been raised to 39.4 billion RMB, reflecting a 4.7% increase from previous estimates [4][22]. Game Releases and Market Performance - The new game "Marvel: Clash" is anticipated to become a long-term revenue generator, with an average of 120,000 concurrent players on Steam in April [1][2]. - The mobile game "Seven Days World" launched globally on April 24, achieving top rankings in 166 countries, although its revenue contribution remains limited [3][15]. - The report highlights the potential of upcoming titles such as "Destiny: Rise" and "Infinite" in the second half of the year [2][3]. Financial Projections - Revenue projections for 2025-2027 have been adjusted upwards by 1%, 2.4%, and 4.2%, respectively, primarily due to increased contributions from PC games [4][22]. - The adjusted net profit for 2026 and 2027 is forecasted to be 42.9 billion RMB and 47.9 billion RMB, respectively, reflecting a growth trajectory [4][22]. - The target price for the company's stock is set at 148.25 USD, corresponding to a 17.2x PE ratio for 2025 [7][26].