Core Insights - Gigabit has reported an unexpectedly strong performance in Q3 2025, with revenue of 1.968 billion yuan, a year-on-year increase of 129.19%, and a net profit of 569 million yuan, up 307.7% [1] - The growth is primarily driven by new product launches, including "Legend of the Staff (Mainland Version)" and "Friends Digging Treasure," which contributed significantly to revenue and profit [1][2] - The company plans to distribute a dividend of 6 yuan per share for Q3, totaling 431 million yuan, which represents 75.61% of the quarterly net profit [2] Financial Performance - For the first three quarters of 2025, the company reported total revenue of 4.486 billion yuan, a 59.17% increase year-on-year, and a net profit of 1.214 billion yuan, up 84.66% [2] - The net cash flow from operating activities reached 1.859 billion yuan, reflecting a substantial increase of 124.79% [2] - Cumulatively, the company has distributed dividends amounting to 9.04 billion yuan in 2025, which is 74.47% of the net profit for the period [2] Product Strategy - The company is focusing on three types of products: commercially successful premium games, innovative projects that break even, and technology exploration projects [4][5] - The management emphasizes a "quality over quantity" approach, aligning with the strategy of its subsidiary, Thunder Game, to enhance selection standards [5] - Future product launches will consider the mini-game platform, but the core focus remains on the creative intentions of the developers [3] Global Expansion - The success of "Legend of the Staff" in Japan has generated expectations for further international expansion, although the management is cautious and prefers a gradual approach [3][4] - The company is planning overseas releases for several products, including "Legend of the Staff" in Europe and Korea, along with other projects in the pipeline [6] Research and Development - R&D expenses have increased in Q3, primarily due to performance bonuses related to successful projects, rather than an increase in personnel [3] - The company maintains a project-centric R&D logic, focusing on assembling teams based on project needs rather than expanding the workforce indiscriminately [3]

Core Viewpoint - The company's 1HFY26 performance met expectations, with a revenue decline of 6% year-on-year to 12.3 billion yuan and a net profit drop of 10% to 800 million yuan, while maintaining a high dividend payout ratio of approximately 102% [1][2]. Performance Review - Revenue was impacted by fluctuations in terminal retail, leading to a focus on optimizing offline channels and expanding online retail operations [1]. - The main brands, Nike and Adidas, saw a revenue decline of 5%, accounting for 88% of total revenue, while other brands experienced a 12% decline [1]. - Direct sales and wholesale revenues fell by 3% and 20% respectively, with a total of 4,688 direct stores, a decrease of 332 stores from the beginning of the fiscal year [1]. - The company opened a new running concept store, ektos, in Shanghai, showcasing innovation in offline retail formats [1]. - Online retail sales grew by double digits, supported by a diversified operational model [1]. Profitability and Cost Control - Gross margin remained stable, with a slight decrease of 0.1 percentage points to 41%, influenced by increased promotional activities in online sales and a higher retail proportion [2]. - The overall expense ratio only increased by 0.1 percentage points to 33.2%, demonstrating effective cost management despite revenue decline [2]. - The net profit margin decreased by 0.3 percentage points to 6.4%, with a net profit decline of 9.8% [2]. - Inventory management was effective, with a 4.7% decrease in inventory by the end of August [2]. - The operating cash flow was healthy, with a net cash flow of 1.35 billion yuan, supporting a high dividend payout ratio [2]. Development Trends - Management indicated that terminal retail performance in September and October would align with 2QFY26, focusing on profit maintenance and improvement in net profit margin for FY26 [2]. Earnings Forecast and Valuation - The company maintains its EPS forecasts for FY26 and FY27 at 0.21 yuan and 0.26 yuan respectively, with current stock prices reflecting 15 and 12 times the FY26 and FY27 earnings [2]. - The target price has been raised by 23% to 4.17 HKD, corresponding to 18 and 15 times the FY26 and FY27 earnings, indicating a potential upside of 20% [2].