NETDRAGON(HK:00777)2024-03-31 16:00Investment Rating - The report maintains a "Buy" rating for the company, with a market price of HKD 10.96 and a sector rating of "Outperform" [1][4]. Core Insights - The company reported a total revenue of RMB 7.1 billion for 2023, a decrease of 9.7% year-on-year. Operating profit was RMB 820 million, down 28.6%, and net profit attributable to shareholders was RMB 550 million, a decline of 34.1% [4][6]. - The gaming segment showed resilience with a revenue increase of 6.6% year-on-year, contributing RMB 4.19 billion, which accounted for 59% of total revenue. The "Magic Domain" IP demonstrated strong performance with a revenue increase of 12.4% [5][6]. - The education segment, represented by Mynd.ai, faced challenges with a revenue drop of 25.7% to RMB 2.91 billion, primarily due to post-pandemic adjustments [5][6]. - The company is actively investing in AI technology, significantly increasing its usage in game art production from 14% in Q1 2023 to 58% in Q4 2023, leading to a 300% reduction in labor costs [5][6]. Financial Performance Summary - Revenue for 2023 was RMB 7,101 million, down from RMB 7,866 million in 2022, reflecting a 9.73% decline [6][7]. - Gross profit increased slightly to RMB 4,398 million, with a gross margin of 61.93%, up 7.08 percentage points from the previous year [7][10]. - The company plans to achieve net profits of RMB 1,024 million, RMB 1,211 million, and RMB 1,353 million for 2024, 2025, and 2026, respectively, with corresponding P/E ratios of 5.2, 4.4, and 3.9 [6][10].