XD INC(02400) 广发证券·2024-06-02 06:01Investment Rating - The report maintains a "Buy" rating for the company, with a current price of 19.58 HKD and a fair value of 29.88 HKD per share [4]. Core Insights - The company's newly launched self-developed game "Let's Go Muffin" has shown excellent performance, significantly boosting the company's revenue. The game entered the top 10 best-selling list in its first week and reached the fourth position by May 28, 2024 [2][10]. - The self-developed games are expected to enhance user activity on the TapTap platform, with increased advertising revenue driven by intensified competition for user acquisition [2][28]. - Cost reduction and efficiency improvements are evident, with a decrease in overall expenses and a reduction in employee numbers from 2,327 in 2021 to 1,452 in 2023, leading to an expected improvement in profitability [2][38]. Summary by Sections 1. Breakthrough in Self-Developed Games - The self-developed game "Let's Go Muffin" launched in January 2024 in the Hong Kong, Macau, and Taiwan markets and in May 2024 in mainland China, achieving a top 10 position in sales shortly after launch [10]. - The game is expected to have a strong revenue performance, contributing positively to the company's overall financial results [10][13]. 2. Increased Activity on TapTap and Advertising Revenue Growth - The launch of "Let's Go Muffin" is anticipated to drive user growth on the TapTap platform, as the game requires a TapTap account for login, which may lead to increased advertising revenue due to heightened competition for user acquisition [28][29]. - The summer of 2024 is expected to see a high density of new game launches, which will likely increase user acquisition costs and advertising revenue [21][23]. 3. Financial Performance: Cost Reduction and Efficiency Gains - The company reported a revenue of 33.89 billion RMB in 2023, a slight decline of 1.22% year-on-year, but with a gross profit increase of 12.7% [38]. - The company has successfully reduced sales expenses by 6.23% to 8.65 billion RMB and R&D expenses by 20.89% to 10.16 billion RMB, indicating a focus on core products and cost efficiency [38][40]. - The net loss for the company narrowed significantly to 0.83 billion RMB in 2023 from 5.53 billion RMB in 2022, suggesting a positive trend in financial recovery [38]. 4. Profit Forecast and Investment Recommendations - Revenue forecasts for 2024 to 2026 are projected at 52.63 billion RMB, 62.46 billion RMB, and 66.74 billion RMB, respectively, with net profits expected to reach 5.58 billion RMB, 7.64 billion RMB, and 8.35 billion RMB [2][39]. - The report employs a segmented valuation method, estimating the game business at 72.09 billion RMB and the community business at 58.55 billion RMB, leading to a total fair valuation of 143.6 billion HKD [2].