HTSC·2025-11-14 07:26Investment Rating - The investment rating for the company is "Buy" [7] Core Insights - The company reported Q3 2025 revenue of 7.685 billion RMB, a year-on-year increase of 5.2%, which is in line with market expectations. Adjusted operating profit reached 688 million RMB, exceeding expectations due to improved traffic and advertising infrastructure [1][4] - The company's active user engagement continues to rise, with daily active users (DAU) reaching 117 million, a 9% year-on-year increase, and average daily usage time increasing by 6 minutes to 112 minutes [2] - The launch of the self-developed game "Escape from Duckkov" has shown promising sales, with over 3 million copies sold, indicating a successful strategy of diversifying and modernizing the game portfolio [3] Summary by Sections Revenue and Profitability - Q3 2025 advertising revenue was 2.57 billion RMB, up 23% year-on-year, surpassing the expected 20% growth. The number of advertisers increased by 16% [2] - The gross margin for Q3 2025 was 36.7%, an increase of 1.8 percentage points year-on-year, driven by high growth in gaming and advertising sectors [4] Game Performance - The company achieved game revenue of 1.51 billion RMB in Q3 2025, a decrease of 17% year-on-year, primarily due to a high base from the previous year. However, the new game "Escape from Duckkov" is expected to positively impact Q4 revenue [3] Cost Management - The company effectively controlled operating expenses, with a sales expense ratio of 13.7%, down 2.8 percentage points year-on-year, which contributed to the better-than-expected operating profit [4] Earnings Forecast and Valuation - Revenue forecasts for 2025-2027 have been slightly adjusted upwards to 30.14 billion RMB, 32.81 billion RMB, and 35.17 billion RMB respectively. Adjusted net profit forecasts have also been increased to 2.45 billion RMB, 3.46 billion RMB, and 4.45 billion RMB for the same period [5][12] - The target market capitalization is set at 119.9 billion RMB, with a target price of 40.1 USD / 312.1 HKD, reflecting a price-to-sales ratio of 4.0x for 2025 [5][13]