2024-05-28 07:02Investment Rating - The report maintains a "Buy" rating for the company with a target price of USD 117.00, indicating a potential upside of 23.5% from the current closing price of USD 94.74 [2][15][21]. Core Insights - The company's Q1 performance met expectations, with revenue increasing by 7% year-on-year to RMB 26.9 billion, aligning with Bloomberg's forecast. Adjusted net profit rose by 12% year-on-year to RMB 8.5 billion, exceeding Bloomberg's expectations by 2% [2][4]. - The gaming segment showed varied performance, with mobile game revenue increasing by 19% year-on-year, while PC game revenue decreased by 15%. The overall gaming gross margin improved by 2.8 percentage points to 69.5% [2][3][4]. - The company has several new game launches planned for the summer, which are expected to drive further growth in mobile game revenue [3][13]. Summary by Sections Financial Performance - Q1 revenue was RMB 26.9 billion, a 7% increase year-on-year, with adjusted net profit at RMB 8.5 billion, a 12% increase [2][6]. - Marketing expenses rose by 38% to RMB 4 billion, accounting for 15% of revenue [2][6]. - Game revenue breakdown: mobile games up 19%, PC games down 15%, and console games up 10% [2][6]. Future Outlook - The company expects a 10% increase in gaming revenue for 2024, despite a 2% downward adjustment in overall revenue forecasts due to short-term adjustments in PC gaming [4][6]. - The target price was adjusted from USD 127 to USD 117, maintaining the "Buy" rating based on a 2024 gaming business P/E ratio of 18x [4][21]. Game Development and Releases - The company has announced over 10 new games and updates across various genres, including MMO and action games, with several titles set to launch in the summer of 2024 [13][3].