Investment Rating - The report initiates coverage with a "Buy" rating for the company [8][3]. Core Insights - The report emphasizes the "Content + Platform" flywheel effect, highlighting the growth potential of the TapTap platform and the company's self-developed games [7][10]. - The company is expected to achieve significant revenue growth, with projected revenues of 64.31 billion, 79.27 billion, and 90.59 billion RMB for 2025-2027, representing year-on-year growth rates of 28%, 23%, and 14% respectively [8][3]. - Adjusted net profits are forecasted to be 17.02 billion, 22.26 billion, and 27.60 billion RMB for the same period, with growth rates of 94%, 31%, and 24% respectively [8][3]. Financial Data and Profit Forecast - Revenue projections for the company are as follows: - 2023: 3,389 million RMB - 2024: 5,012 million RMB - 2025E: 6,431 million RMB - 2026E: 7,927 million RMB - 2027E: 9,059 million RMB - Year-on-year growth rates for revenue are projected at -1%, 48%, 28%, 23%, and 14% respectively [6]. - Adjusted net profit forecasts are: - 2023: -34 million RMB - 2024: 877 million RMB - 2025E: 1,702 million RMB - 2026E: 2,226 million RMB - 2027E: 2,760 million RMB - Year-on-year growth rates for net profit are projected at 93%, 2670%, 94%, 31%, and 24% respectively [6]. Market Dynamics - The gaming industry is experiencing a recovery in license issuance, with a total of 1,195 licenses issued in the first nine months of 2025, a year-on-year increase of 25% [11][31]. - The report notes that TapTap is becoming an increasingly important channel for game promotion, with its online promotion service revenue reaching 976 million RMB in the first half of 2025, capturing approximately 3.27% of the mobile game advertising market [7][23]. - The growth of TapTap is driven by improvements in domestic licensing, advancements in self-developed games, and strategic expansions into PC and international markets [11][30]. Competitive Advantage - TapTap's low revenue-sharing model (maximum 5% for paid games and free-to-play games incur no fees) is highlighted as a significant advantage for attracting developers, especially independent and small developers [25][10]. - The platform has established a strong community and content ecosystem, differentiating itself from traditional app stores and social media platforms [10][25]. - The report suggests that the market has not fully recognized the value and potential of the TapTap platform, which is well-positioned to capitalize on the evolving gaming landscape [10][11].

Investment Rating - The report initiates coverage with a "Buy" rating for the company [3][8]. Core Insights - The report emphasizes the "Content + Platform" flywheel effect, highlighting the value of the TapTap platform and the company's self-developed games [7][10]. - The gaming industry is experiencing a recovery in license supply, which, combined with changes in distribution channels, positions TapTap as a significant promotional channel for games [20][27]. - The company's self-developed game capabilities are gradually being validated, with successful titles contributing to revenue growth [51]. Financial Data and Profitability Forecast - Revenue projections for the company are as follows: 2025E at 6,431 million RMB, 2026E at 7,927 million RMB, and 2027E at 9,059 million RMB, with year-on-year growth rates of 28%, 23%, and 14% respectively [6][8]. - Adjusted net profit attributable to ordinary shareholders is forecasted to be 1,702 million RMB in 2025E, 2,226 million RMB in 2026E, and 2,760 million RMB in 2027E, with significant growth rates of 94%, 31%, and 24% respectively [6][8]. - The report employs the SOTP valuation method, estimating the company's market value at 549 billion HKD [8]. TapTap Business Growth Drivers - The growth of TapTap is driven by an increase in domestic game licenses, advancements in self-developed games, and expansion into PC and international markets [9][35]. - The platform has established a developer-user flywheel effect, with over 240,000 developers and 300,000 games launched, leading to a significant increase in monthly active users (MAU) [35][41]. - The report anticipates that TapTap's advertising revenue could exceed 5 billion RMB by 2030, driven by user growth and improved monetization strategies [11][49]. Self-Developed Game Capabilities - The company has successfully adjusted its product cycle since 2024, focusing on strong game categories and validating its strategic direction [51]. - Upcoming titles such as "伊瑟" and "心动小镇" are expected to contribute positively to the company's pipeline and revenue [51][40].

Macro Strategy - The report analyzes three historical cases of capacity adjustment over a century, highlighting the negative feedback loop of capacity imbalance and the importance of government intervention to restore balance [1][12] - It emphasizes that supply-demand rebalancing requires simultaneous efforts in controlling capacity, restoring credit, and stabilizing employment, rather than relying solely on supply or demand policies [1][12] Fixed Income - The new bond value-added tax regulation enhances the relative attractiveness of credit bonds, as their interest income is not subject to the tax, while government bonds lose their tax exemption [2][3][13] - The adjustment in tax rates is expected to narrow the yield spread between credit bonds and other interest rate bonds by approximately 10 basis points, with potential increases in relative value for credit bonds by 5-15 basis points for proprietary trading departments [2][3][14] Industry Analysis - The asset operation and maintenance (O&M) industry is gaining importance post-capital formation peak, with growth driven more by product development than by personnel or capital [4][15] - The report indicates that the O&M market is projected to grow significantly, with the current market size at approximately 2.44 trillion and expected to reach around 5.5 trillion in ten years [4][15] - The report suggests focusing on companies like Borui Data, Rongzhi Rixin, and Xianheng International, as they are positioned to benefit from the increasing demand for high-quality O&M services [4][15] Electronic Industry - The ASIC business model requires service providers to have strong IP design and SoC design capabilities, with major players like Broadcom and Marvell holding significant market shares [5][16][17] - The custom chip market is projected to reach $55.4 billion by 2028, with a compound annual growth rate (CAGR) of 53% from 2023 to 2028, driven by the demand for AI acceleration [5][16][17] - The report highlights the potential for margin pressure in the custom chip business due to increased competition from domestic firms entering the AI ASIC market [5][16][17]

Investment Rating - The investment rating for the company is "Buy" (maintained) [1] Core Views - The company has exceeded market expectations with its 2025H1 performance, forecasting revenue of at least 30.50 billion yuan, a year-on-year increase of approximately 37%, and a net profit of at least 7.90 billion yuan, a year-on-year increase of about 215% [8] - The growth in revenue is primarily driven by the strong performance of self-developed games and the steady growth of the TapTap platform, with improvements in game gross margins and user engagement [8] - The company has revised its profit forecasts upwards, expecting net profits of 1.69 billion yuan, 1.94 billion yuan, and 2.05 billion yuan for 2025-2027, respectively, reflecting a positive outlook on new game releases and the TapTap platform's value [8] Financial Summary - Total revenue is projected to grow from 5,012 million yuan in 2024 to 7,800 million yuan in 2027, with a compound annual growth rate (CAGR) of approximately 2.87% [1] - The net profit is expected to increase significantly from 811.53 million yuan in 2024 to 2,047.56 million yuan in 2027, indicating a strong growth trajectory [1] - The earnings per share (EPS) is forecasted to rise from 1.65 yuan in 2024 to 4.15 yuan in 2027, reflecting improved profitability [1] - The price-to-earnings (P/E) ratio is projected to decrease from 40.94 in 2024 to 16.23 in 2027, suggesting an attractive valuation as earnings grow [1]

Core Viewpoint - Xindong Company (02400.HK) anticipates significant revenue and profit growth for the first half of 2025, driven by successful game operations and the performance of the TapTap platform [1][3][22]. Financial Performance - Expected revenue for H1 2025 is at least RMB 30.5 billion, a 37% increase from RMB 22.2 billion in the same period last year [1]. - Projected net profit is at least RMB 7.9 billion, representing a 215% year-on-year growth [1]. Game Performance - Key contributors to revenue growth include self-developed games such as "Ragnarok M: Beginner's Server," "Xindong Town," and "Torchlight: Infinite" [3][10]. - "Ragnarok M: Beginner's Server" simplifies the original game's complex systems, appealing to casual players [3]. - "Xindong Town" is a 3D social simulation game that emphasizes leisurely gameplay and has maintained a stable position in the iOS sales rankings [5][6]. - "Torchlight: Infinite," launched on May 10, 2023, has shown strong performance, reaching the top of the iOS free charts and peaking at 11th in sales [8][10]. New Game Releases - The new RPG "Ether: Reboot Day" has topped the iOS free charts in several Southeast Asian countries and is set for a domestic launch on September 25, 2023 [11][14]. - "Xindong Town" is expected to enter international markets in Q4 2025, while "Ragnarok RO: Guardian of Eternal Love 2" is planned for 2026 [14]. TapTap Platform Growth - The TapTap platform has seen continuous revenue and profit growth, attributed to improved advertising algorithms and user engagement, despite stable monthly active users [16]. Strategic Investments - Xindong plans to acquire a 5.3% stake in game company MiAO for $14 million, valuing MiAO at approximately $264 million [17][19]. - MiAO focuses on developing games that integrate social elements, aiming to enhance player connections [19][20]. Company Outlook - Xindong has successfully turned around its financial performance, achieving profitability and stable cash flow, positioning itself for future growth [22][23].