NETDRAGON(HK:00777)2024-04-02 16:00Investment Rating - The report maintains a "Buy" rating for the company with a target price adjusted to HKD 15, indicating a potential upside of 37% from the current price of HKD 10.96 [2][3][14] Core Insights - The company's revenue for 2023 was RMB 7.1 billion, a decrease of 10% year-on-year, which was below market expectations by 3.1%. Game and application service revenue grew by 6.6% to RMB 4.2 billion, while Mynd.ai revenue fell by 25.7% to RMB 2.9 billion due to the normalization of the post-pandemic operating environment [2][3] - The gross margin improved by 7.0 percentage points to 61.9%, primarily due to the increased proportion of high-margin game revenue. The adjusted net profit was RMB 0.96 billion, with an adjusted net profit margin of 13.5% [2][3] - The company declared a final dividend of HKD 0.4 per share, bringing the total annual dividend to HKD 1.8 per share, resulting in a dividend yield of 16.4% [2] Revenue and Profit Forecast - The company expects revenues of RMB 7.2 billion and RMB 7.6 billion for FY24E and FY25E, respectively, with adjusted net profits projected at RMB 1.1 billion and RMB 1.3 billion for the same periods [3][14] - The target price corresponds to an 8x P/E ratio for 2024 [2][3] Game Business Performance - The gaming segment remained stable, with game revenue increasing by 9.6% to RMB 3.8 billion. Domestic game revenue grew by 10.5%, while overseas revenue increased by 4.5%, affected by a decline in player activity post-pandemic [2][3] - The core game IP "Magic Domain" maintained stability, with its revenue rising by 14% to RMB 2.9 billion and user engagement increasing by 50% year-on-year [2] Education Software Market Position - The company’s Promethean brand continues to lead the global K-12 interactive flat panel display market (excluding China) with a market share of 17.4%. Recently, Promethean launched a comprehensive SaaS solution to leverage hardware advantages and explore software revenue opportunities [2][3]