Core Viewpoint - The partnership between Zhongyou Mobile and Kaiying Network continues with the renewal of the licensing agreement for the IP of "The Legend of Sword and Fairy: A New Beginning" and the signing of a new card RPG game based on the same IP, set to enter development in 2026 [1] Company Summary - Zhongyou Mobile has renewed its licensing agreement with Kaiying Network for the IP of "The Legend of Sword and Fairy: A New Beginning" [1] - A new collaboration has been established for a card RPG game based on the "Legend of Sword and Fairy" IP, which is scheduled to begin development in 2026 [1] Industry Summary - The continuation of IP licensing agreements indicates a positive trend in the gaming industry, particularly in the realm of adaptations and collaborations [1] - The development of new games based on established IPs reflects ongoing investment in popular franchises, which may enhance market competitiveness [1]

Core Insights - The company reported strong financial performance in 2024, with revenue reaching 5.118 billion yuan, a year-on-year increase of 19.16%, and net profit attributable to shareholders at 1.628 billion yuan, up 11.41% [1] - The company continues to reward shareholders through cash dividends and share buybacks, totaling 426 million yuan, which represents 26.18% of the net profit for the year [1] - The company is focusing on game development and expansion into international markets, launching several new titles that have performed well [2][3] Financial Performance - In Q1 2025, the company achieved revenue of 1.352 billion yuan, a growth of 3.46% year-on-year, and net profit of 518 million yuan, up 21.57% [1] - The company’s operating expenses in sales, management, and R&D decreased by 3.2 percentage points, 0.8 percentage points, and 1.0 percentage points respectively [1] - Forecasts for net profit growth from 2025 to 2027 are 25.32%, 18.98%, and 17.86%, with projected profits of 2.041 billion yuan, 2.428 billion yuan, and 2.862 billion yuan respectively [4] Product Development and Market Expansion - The company launched the card strategy game "Nazarick King" in 2024, achieving over 1 million pre-registrations domestically and ranking high on various charts [2] - The overseas revenue for the company reached 375 million yuan in 2024, marking a significant increase of 221.48% [2] - The company is integrating AI into game development, enhancing efficiency and creating new market opportunities [3] Strategic Initiatives - The company is committed to its core strategy of focusing on the gaming industry and has introduced multiple new products to accelerate its international presence [2] - The development of AI models aims to streamline the game development process and improve collaboration [3] - The company has invested in AI firm Tyrell AI Limited, increasing its stake to over 16%, further expanding its footprint in the AI sector [3]

Investment Rating - The report maintains a "Buy-A" rating for the company with a target price of 19.6 yuan, reflecting a 20x PE valuation for 2025 [3][5]. Core Insights - The company reported a revenue of 5.118 billion yuan and a net profit of 1.628 billion yuan for 2024, with year-on-year growth rates of 19.16% and 11.41% respectively. For Q1 2025, revenue was 1.353 billion yuan and net profit was 518 million yuan, showing year-on-year growth of 3.46% and 21.57% [1]. - The mobile gaming segment, which accounts for 80% of total revenue, grew by 13.38% year-on-year, although its gross margin decreased by 2.75 percentage points. The overseas business saw a remarkable growth of 222%, albeit with a low revenue contribution of about 7%, and its gross margin improved by 8.53 percentage points [1][2]. - The company has a clear positioning in the gaming industry, focusing on IP games, and has successfully launched new IPs while maintaining classic titles. The overseas expansion strategy is expected to continue driving growth in 2025 [2]. Financial Performance Summary - The company is projected to achieve revenue growth rates of 22.8%, 15%, and 15% for 2025-2027, with net profit growth rates of 29.4%, 15%, and 10% respectively. The expected EPS for these years are 0.98 yuan, 1.13 yuan, and 1.23 yuan [3][8]. - The financial metrics indicate a stable performance with a net profit margin of 34.0% in 2023, projected to be 33.5% in 2025, and a return on equity (ROE) of 27.9% in 2023, expected to decline to 22.6% by 2025 [8][9].

Core Viewpoint - The performance of major A-share gaming companies in 2024 shows a significant disparity, with Perfect World maintaining the third position in revenue but suffering substantial losses, while other companies like Shenzhou Taiyue and Kaixin Network are showing better profitability and growth [1][17]. Company Performance Summary Perfect World - In 2024, Perfect World reported a revenue of 5.57 billion yuan, a decrease of 28.50% year-on-year, and a net loss of 1.29 billion yuan, marking a shift from profit to loss [2][3]. - The gaming business revenue was 5.18 billion yuan, down 23.32% from the previous year, attributed to project adjustments and underperforming game launches [2][3]. - The company underwent significant layoffs, reducing its workforce by 32% to 3,905 employees, impacting various expense categories [4][5]. Shenzhou Taiyue - Shenzhou Taiyue achieved a revenue of 6.45 billion yuan in 2024, an increase of 8.22%, with a net profit of 1.43 billion yuan, up 60.92% [10][11]. - The gaming segment generated 4.66 billion yuan, a growth of 3.66%, primarily driven by overseas player spending on the game "Age of Origins" [8][10]. Kaixin Network - Kaixin Network reported a revenue of 5.12 billion yuan, a year-on-year increase of 19.16%, and a net profit of 1.63 billion yuan, up 11.41% [12][13]. - The company saw a significant increase in overseas revenue, which grew by 221.48% to 375 million yuan, driven by successful game launches in various markets [14]. Industry Ranking - The ranking of A-share gaming companies shows that 37 Interactive Entertainment and Century Huatong remain the top two, while Perfect World, despite its revenue position, is the only major company reporting losses [16][17]. - Perfect World has been surpassed in overall revenue by Shenzhou Taiyue and is at risk of being overtaken by Kaixin Network in the near future [17].