Core Insights - 2024 is seen as a pivotal year for the gaming industry, with companies facing challenges due to market changes and increased competition, leading to difficulties in finding suitable investment opportunities [1] - A total of 30 listed gaming companies reported asset impairment, indicating significant operational issues and a decline in goodwill value [1][2] Group 1: Company Performance and Impairment - 13 older gaming companies, once successful, are now facing asset value reductions due to failure to adapt to market changes and poor performance of new products [2] - Shanghai Tianxi Interactive Entertainment reported an impairment of approximately 437 million yuan due to underperforming new releases, including the MMORPG "Sword and Knight" [4][5] - Taole Network, known for its classic MMORPG "Peach Blossom Source," faced a 29.16 million yuan impairment, attributed to declining revenues from older games and poor performance of new titles [10][26] Group 2: Market Competition and Strategy - Companies that previously thrived in stable user bases are now struggling due to intensified competition in their respective genres, leading to financial losses [4] - The gaming market is shifting towards mini-games, but many companies, including Junhai, have seen a significant drop in revenue, with a 41.3% year-on-year decline reported [26] - Companies like Shenzhen Daoxi are focusing on maintaining older games rather than developing new ones, which has become a risky strategy as market preferences evolve [30] Group 3: Investment and Acquisition Trends - Many companies were initially acquired for their strong performance, but as they lost competitiveness, they faced substantial asset losses, highlighting the risks associated with high acquisition premiums [50] - The gaming industry is experiencing a transformation, with companies like Webzen Inc. reporting a 9% revenue increase despite facing impairments, indicating that even leading firms are not immune to market volatility [21][24]

Performance Overview - In 2024, the company achieved operating revenue of 1.136 billion, a year-on-year decline of 14.56% [1] - The net profit attributable to shareholders was -261 million, and the net profit excluding non-recurring items was -272 million [1] - In Q1 2025, the company reported operating revenue of 315 million, a year-on-year increase of 24.16% [1] - The net profit attributable to shareholders for Q1 2025 was 25.43 million, a year-on-year increase of 78.56% [1] - The net profit excluding non-recurring items for Q1 2025 was 23.99 million, a year-on-year increase of 143.78% [1] Game Releases and Performance - The game "Star Wings" received positive reviews and was launched in the domestic market in Q2 2024, with a release in Japan on November 21, 2024 [2] - "Star Wings" achieved second place on both Google Play and App Store in Japan within its first month and ranked in the top two on Steam's Japanese sales chart [2] - The game "Heroic Legend" launched on Steam in Q2 2024, gaining significant attention and ranking ninth in Steam's domestic sales chart [2] - "Heroic Legend" also performed well in overseas markets, ranking in the top seven on Steam's Korean sales chart [2] - The company plans to release a DLC version for "Heroic Legend" in 2025 and will continue to develop the game for long-term operation [2] Technological Advancements - The company is rapidly iterating its product features and has seen a continuous increase in user numbers [3] - The integration of DeepSeek technology has led to breakthroughs in multi-modal models, including emotion analysis and voice recognition [3] - The launch of the "AI Astrology" feature combines astrology culture with AI technology to enhance user engagement [3] - The company is exploring AI and social interaction scenarios, aiming to develop AI virtual companions and enhance user experience [3] Strategic Partnerships - The company has partnered with NIO and Lantu Motors to explore multi-scenario entry points for cloud gaming [4] - NIO's new smart system version Banyan 3.0.0 will feature cloud gaming support from the company's platform [4] - The collaboration with Lantu Motors aims to enhance the entertainment experience in their new electric SUV [4] Revenue Forecast - The company is expected to achieve operating revenues of 1.533 billion, 1.809 billion, and 1.990 billion for the years 2025 to 2027, respectively [4] - The net profit attributable to shareholders is projected to be 141 million, 166 million, and 192 million for the same period [4] - Corresponding price-to-earnings ratios are estimated at 37, 32, and 27 times [4]

Investment Rating - The report maintains a "Buy" rating for the company [6] Core Views - The company reported a revenue of 1.136 billion yuan in 2024, a year-on-year decline of 14.56%, and a net profit attributable to shareholders of -261 million yuan [1] - In Q1 2025, the company achieved a revenue of 315 million yuan, a year-on-year increase of 24.16%, and a net profit attributable to shareholders of 25.43 million yuan, a year-on-year increase of 78.56% [1] - The new games "Star Wings" and "Heroic Legend" have received positive feedback and are expected to expand into new markets [2] - The integration of AI applications through the "Give Mai" platform is showing promising results, enhancing user engagement and social interaction [3] - Collaborations with NIO and Lantu Motors for cloud gaming support are set to enhance the entertainment experience in vehicles [4] - Revenue projections for 2025-2027 are 1.533 billion, 1.809 billion, and 1.990 billion yuan respectively, with net profits expected to be 141 million, 166 million, and 192 million yuan [4] Financial Overview - In 2024, the company experienced a revenue decline of 14.56% compared to 2023, with a projected revenue growth of 35% in 2025 [5] - The net profit for 2024 is projected to be -261 million yuan, with a significant recovery expected in 2025 with a net profit of 141 million yuan [5] - The earnings per share (EPS) is expected to recover from -0.53 yuan in 2024 to 0.29 yuan in 2025 [5] - The company’s price-to-earnings (P/E) ratio is projected to be 37, 32, and 27 for the years 2025, 2026, and 2027 respectively [5]