SANQI HUYU(SZ:002555) HTSC·2025-08-26 05:55Investment Rating - The investment rating for the company is maintained as "Buy" [1] Core Views - The company reported a revenue of 8.486 billion RMB for H1 2025, a year-over-year decrease of 8.08%, while the net profit attributable to shareholders was 1.4 billion RMB, an increase of 10.72% year-over-year [1] - The second quarter showed significant improvement with a revenue of 4.243 billion RMB, down 5.33% year-over-year but with a net profit of 0.851 billion RMB, up 31.24% year-over-year [1] - The company plans to distribute a cash dividend of 2.10 RMB per 10 shares, totaling 0.924 billion RMB, which represents approximately 66% of the net profit for the period [1] - The company is optimistic about its product operational capabilities and overseas expansion potential, maintaining a "Buy" rating [1] Revenue and Product Performance - The mobile gaming business generated 8.239 billion RMB in H1 2025, a decline of 8.03% year-over-year, with the highest monthly revenue from global releases reaching approximately 2.2 billion RMB [2] - New products launched in early 2025, such as "Time Explosion" and "Heroes Don't Flash," performed well, while long-term products continued to contribute to revenue [2] - Overseas revenue was 2.724 billion RMB, down 6.01% year-over-year, accounting for 32.10% of total revenue [2] Product and IP Development - The company has a rich reserve of products and IPs, including adaptations of popular titles like "Douluo Dalu" and "Doupocangqiong" [3] - The self-developed game "Douluo Dalu: Hunting Soul World" has entered public testing, aligning with the company's strategy of product excellence [3] - The company is enhancing its AI capabilities, building a comprehensive AI-enabled ecosystem centered around its self-developed industry model "Xiao Qi" [3] Financial Metrics and Profitability - The gross margin for H1 2025 was 76.71%, a decrease of 2.92 percentage points year-over-year, influenced by increased operating costs [4] - The sales expense ratio decreased by 6.09 percentage points to 51.97%, as previous growth-phase games entered maturity, leading to reduced traffic investment [4] - The net profit margin increased by 2.81 percentage points year-over-year to 16.51% due to reduced sales expenses [4] Profit Forecast and Valuation - The company forecasts net profits of 2.831 billion RMB, 3.137 billion RMB, and 3.429 billion RMB for 2025, 2026, and 2027 respectively, with corresponding EPS of 1.28 RMB, 1.42 RMB, and 1.55 RMB [5] - The target price is adjusted to 23.04 RMB based on an 18x PE valuation for 2025, up from a previous target of 19.33 RMB [5]