Giant Network(SZ:002558) HTSC·2025-08-28 09:05Investment Rating - The investment rating for the company is "Buy" with a target price of RMB 38.99 [1][8]. Core Views - The company reported a revenue of RMB 1.662 billion for H1 2025, representing a year-over-year increase of 16.47%, and a net profit of RMB 777 million, up 8.27% year-over-year. The growth is primarily driven by increased game revenue, particularly from "Supernatural Action Group" [1]. - The company is optimistic about the continued contribution from "Supernatural" and the ongoing integration of AI in gaming, which is expected to enhance user experience and drive long-term growth [1][3]. Summary by Sections Financial Performance - In Q2 2025, the company achieved a revenue of RMB 938 million, a year-over-year increase of 28.42% and a quarter-over-quarter increase of 29.64%. The net profit for Q2 was RMB 429 million, up 17.49% year-over-year and 23.37% quarter-over-quarter [1]. - The company’s H1 gross margin was 90.78%, an increase of 2.36 percentage points year-over-year, attributed to a decrease in game-related operating costs [4]. Game Performance - "Supernatural Action Group" has shown rapid growth, with simultaneous online users exceeding 1 million in July, and it reached a peak position of TOP4 in the iOS game sales chart. The company’s strategy for older games has also proven effective, with "Original Journey" maintaining a stable monthly revenue of approximately RMB 100 million [2]. - The product "Ming Jiang Sha" received a new license in July and is set to begin its first paid test on August 27 [2]. AI Integration - The company is advancing the integration of AI in gaming, with the upcoming launch of "Space Kill" featuring a new mode that combines multiple users and AI entities in competitive gameplay, enhancing social interaction and strategic depth [3]. - The intelligent transformation of the "Journey" IP has made significant progress, with the core AI NPC achieving an accuracy rate of over 99% in strategy guidance, further improving user experience [3]. Profit Forecast and Valuation - The company has adjusted its profit forecasts for 2025-2027, raising the expected net profit to RMB 2.258 billion for 2025, RMB 3.275 billion for 2026, and RMB 3.700 billion for 2027, reflecting increases of 15.47%, 38.57%, and 40.96% respectively [5][12]. - The target price has been raised to RMB 38.99, based on a 23x PE for 2026, reflecting the strong performance of new products and the effective integration of AI in gaming [5].