Core Insights - The company reported a record high quarterly revenue of 1.497 billion in Q3 2025, representing a year-on-year increase of 9.08%, and a net profit attributable to shareholders of 633 million, up 34.51% year-on-year [1] - The growth in revenue is primarily driven by the increased contribution from the "Legend Box," which has a higher gross margin, leading to an overall gross margin increase to 84.19% [1] - The company has established a vertical community platform, "Legend Box," which is expected to open up new avenues for revenue growth through advertising, promotion, and live streaming [2] Financial Performance - For the first three quarters of 2025, the company achieved a total revenue of 4.075 billion, reflecting a year-on-year growth of 3.75%, and a net profit of 1.583 billion, which is a 23.70% increase year-on-year [1] - The company demonstrated strong cost control with a decrease in sales, management, and R&D expense ratios in Q3 2025 [1] Product Development and Market Strategy - The company has a rich pipeline of new games, including "Blood Legend: Return," and several other licensed IP adaptations, which are expected to support future revenue growth [2] - The company is actively developing AI capabilities, including a comprehensive AI development platform and applications, which are anticipated to create competitive advantages in the gaming industry [3] Investment Outlook - The company is projected to achieve revenues of 5.936 billion, 6.986 billion, and 7.442 billion for the years 2025 to 2027, with net profits of 2.154 billion, 2.536 billion, and 2.790 billion respectively [3] - The increase in platform-based business is expected to solidify financial performance, with a target price of 29.75 yuan based on a 25x PE ratio for 2026 [3]

Investment Rating - The report assigns a "Buy-A" rating to the company, with a 6-month target price of 29.75 CNY [4]. Core Insights - The company reported a record high quarterly revenue of 1.497 billion CNY in Q3 2025, representing a year-on-year increase of 9.08%. The net profit attributable to shareholders reached 633 million CNY, up 34.51% year-on-year [1]. - The growth in revenue is primarily driven by the "Legend Box," which has increased its contribution to the company's revenue, leading to an improved gross margin of 84.19%, up 3.12 percentage points from the previous quarter [1]. - The company has a robust pipeline of new games, including titles based on popular IPs, which is expected to support future revenue growth [2]. - The company is actively developing AI capabilities, which may create competitive advantages in the gaming industry [3]. Financial Performance Summary - For the first three quarters of 2025, the company achieved a total revenue of 4.075 billion CNY, a year-on-year increase of 3.75%, and a net profit of 1.583 billion CNY, up 23.70% year-on-year [1]. - The report forecasts revenues of 5.936 billion CNY, 6.986 billion CNY, and 7.442 billion CNY for 2025, 2026, and 2027, respectively, with net profits projected at 2.154 billion CNY, 2.536 billion CNY, and 2.790 billion CNY for the same years [8]. - The company's operating efficiency is reflected in its cost control, with sales, management, and R&D expense ratios showing favorable trends [1][2].

Summary of Key Points from the Conference Call of Kaiying Network Company Overview - **Company**: Kaiying Network - **Industry**: Gaming and Entertainment Financial Performance - **Revenue**: In the first three quarters of 2025, revenue reached 43.07 billion CNY, a year-on-year increase of 9.08% [2][3] - **Net Profit**: Net profit attributable to shareholders was 6.33 billion CNY, up 34.51% year-on-year [2] - **Total Assets**: Total assets amounted to 131.68 billion CNY, a growth of 64.06% compared to the end of the previous year [2][3] - **Net Assets**: Net assets attributable to shareholders increased to 102.15 billion CNY, a rise of 56.01% [2] International Market Expansion - **Overseas Revenue**: International revenue was 3.28 billion CNY, accounting for 8.05% of total revenue, with a year-on-year growth of 38.78% [2][9] - **Successful Titles**: Successful overseas launches included games like "Monster Alliance" and others in regions such as Korea, Hong Kong, Macau, and Europe [9] Product Development and IP Strategy - **IP Utilization**: The company is diversifying its product offerings through the introduction and incubation of IPs such as "Gundam" and "Overlord" [2][6] - **Game Development**: The company is focusing on core genres and innovative categories, strengthening its competitive edge with nostalgic products like "Original Legend" and "Angel Battle" [5][6] AI and Technology Integration - **AI Development**: Kaiying Network has developed an AI platform named "Song" for automating the entire game development process, significantly reducing development time [7][8] - **AR Brand Launch**: The company launched an AR brand "Warm Heart Valley Dream Journey" to meet emotional companionship needs [8] Shareholder Returns and Future Plans - **Share Buyback**: The company has repurchased over 800 million CNY worth of shares and plans to maintain this strategy for the next five years [4][10] - **New Game Launches**: Anticipated new game "Three Kingdoms: Return of Hearts" is set to launch in early 2026, with ongoing investments in R&D [4][21] "Legend Box" Platform Insights - **User Engagement**: "Legend Box" focuses on enhancing user experience with nearly 500,000 daily active users and aims to expand its community [4][11][18] - **Revenue Sources**: The platform's revenue comes from advertising, user transactions, and additional services, with brand zone revenue around 2.45 billion CNY [12][29] - **Cost Structure**: Major costs include personnel, security maintenance, and advertising, with a focus on optimizing operational efficiency [19] Market Position and Competitive Edge - **Target Audience**: The platform targets nostalgic players from the 70s to early 90s, providing a safe and reliable gaming environment [17] - **Growth Strategy**: Plans to expand into various nostalgic game categories and enhance partnerships with major developers to increase market share [18][30] Future Development and Market Strategy - **Game Development Focus**: Continued investment in new game projects and technology development, with a focus on AI and engine improvements [24] - **Marketing Strategy**: The company will avoid large-scale user acquisition campaigns, opting for product optimization and regular channels for user growth [27] Conclusion - **Long-term Vision**: Kaiying Network aims to provide stable returns to investors while focusing on core business growth and maintaining strong communication with stakeholders [35]

Investment Rating - The report maintains an investment rating of "Buy" for the company with a target price of RMB 29.73 [1][5]. Core Insights - The company's Q3 revenue reached RMB 1.497 billion, representing a year-over-year increase of 9.08% and a quarter-over-quarter increase of 22.19%. The net profit attributable to shareholders was RMB 633 million, up 34.51% year-over-year and 46.66% quarter-over-quarter [1]. - The growth in Q3 was primarily driven by the high-margin "996 Legend Box" platform business, which signed brand area cooperation agreements with leading publishers, confirming revenue starting from Q3 [2]. - The company is transitioning from a game developer to a platform company, with expectations of continued user growth and diversified monetization methods [2]. Revenue and Profitability - For the first three quarters of 2025, the company achieved a revenue of RMB 4.075 billion, a year-over-year increase of 3.75%, and a net profit of RMB 1.583 billion, up 23.70% year-over-year [1]. - The company has a stable revenue stream from existing games and has several new IP titles in the pipeline, expected to launch by the end of 2025 or in 2026 [3]. AI Development and Commercialization - The company is diversifying its AI initiatives, including the upcoming launch of the AI companion application "EVE" and the AI game development platform "SOON," which aims to lower development barriers [4]. - The AI product lineup is expected to provide valuation flexibility and open new market opportunities [4]. Financial Forecast and Valuation - The report maintains profit forecasts for 2025-2027 at RMB 2.182 billion, RMB 2.538 billion, and RMB 2.866 billion respectively, with a PE valuation of 25X for 2026 [5]. - The target price reflects a slight adjustment from the previous value of RMB 30.72, based on the company's ongoing growth and market positioning [5].

Core Viewpoint - The gaming industry is experiencing a significant boost due to stable approval of game licenses, a recovery in monthly market conditions, and accelerated AI implementation, forming a triple driving force for the sector [1][3]. Group 1: Industry Overview - In August 2025, a total of 166 domestic games were approved, marking a new monthly high for the year, with 107 mobile games, 39 casual puzzle games, and 1 PS5 game included [1]. - The actual sales revenue of China's gaming market in July 2025 reached 29.084 billion yuan, with a month-on-month increase of 8.14% and a year-on-year increase of 4.62% [1]. - The mobile gaming sector generated 21.36 billion yuan in July, reflecting a month-on-month growth of 6.36% and a year-on-year growth of 0.92% [1]. Group 2: Company Performance - Giant Network (002558.SZ) reported a revenue of 1.662 billion yuan in H1 2025, up 16.47% year-on-year, with a mobile gaming revenue growth of 21.56% and a gross margin of 91.92% [2]. - 37 Interactive Entertainment (002555.SZ) achieved a revenue of 8.486 billion yuan and a net profit of 1.4 billion yuan in H1 2025, with a focus on a diversified and global operational framework [2]. - Kaiying Network (002517.SZ) recorded a revenue of 2.578 billion yuan and a net profit of 950 million yuan in H1 2025, continuing its strategy of long-cycle products and IP reserves [2]. Group 3: Investment Recommendations - The normalization of game license approvals and the release of new products during the summer season are expected to support performance in the short term [3]. - AI technology is anticipated to reshape research and operations, leading to cost reduction and content upgrades in the mid-term [3]. - Long-term growth opportunities are expected from the expansion of gaming products overseas [3].

Performance Summary - The company achieved operating revenue of 2.578 billion yuan in the first half of 2025, a year-on-year increase of 0.89% [1] - The net profit attributable to shareholders reached 950 million yuan, up 17.41% year-on-year, with a fully diluted EPS of 0.44 yuan [1] - In Q2 2025, the company reported a single-quarter operating revenue of 1.225 billion yuan, a decrease of 1.8% year-on-year, while the net profit attributable to shareholders was 432 million yuan, an increase of 12.8% year-on-year, corresponding to a diluted EPS of 0.20 yuan [1] Product Development and International Expansion - The company's product matrix includes retro-themed games and innovative premium titles, with notable products such as "Original Legend," "Angel Battle," and "Dragon Valley World" in the retro category, and "Three Kingdoms: The World Returns," "Douluo Continent: The Legend of Evil," and "Tomb Raider: The Journey" in the innovative category [1] - The overseas business saw significant growth, with "Sword and Fairy: A New Beginning" topping the iOS free charts in Macau and achieving high rankings in Taiwan and Hong Kong, leading to overseas operating revenue of 202 million yuan, a year-on-year increase of 59.6% [1] AI and New Business Initiatives - The company is advancing AI applications with its self-developed "Dream Weaving" model and the launch of the AI industrial pipeline "SOON," which automates the entire process from art asset generation to code deployment [2] - The "Legend Box" community platform is being developed to integrate various gaming elements, including live streaming, esports, and short dramas, aiming to enrich the content ecosystem and create new growth points [2] - The digital asset platform "Shiyuan Cube" combines blockchain, Web 3.0, and AI technologies to build a marketing ecosystem for digital art, promoting consumption in cultural tourism through a "digital assets + real economy" model [2]

Investment Rating - The report maintains a "Buy" rating for the company, expecting its stock price to outperform the benchmark index by more than 15% [3][11]. Core Insights - The company reported stable profit growth in its 2025 mid-year report, with a revenue of 2.578 billion yuan, a year-on-year increase of 0.89%, and a net profit attributable to shareholders of 950 million yuan, up 17.41% year-on-year [1]. - The company has a strong product and IP reserve, with significant growth in overseas revenue, and is actively expanding into the AI industry [2]. - The company has announced a share repurchase plan, intending to buy back 0.16%-0.32% of its total shares with a total fund of 100 to 200 million yuan, at a price not exceeding 29.33 yuan per share [1]. Financial Performance Summary - For the first half of 2025, the company achieved a revenue of 2.578 billion yuan, with a net profit of 950 million yuan, and a non-recurring net profit of 939 million yuan, reflecting year-on-year increases of 17.41% and 17.18% respectively [1]. - The second quarter of 2025 saw a revenue of 1.225 billion yuan, a decrease of 1.80% year-on-year, while the net profit was 432 million yuan, an increase of 12.79% year-on-year [1]. - The company’s overseas game revenue reached 202 million yuan in the first half of 2025, marking a year-on-year increase of 59.57% [2]. Product and Market Strategy - The company has established a competitive edge in retro-themed games, with successful titles such as "Original Legend" and "Angel Battle" [2]. - The company is actively developing new products, with several titles like "Tomb Raider: Journey" and "Three Kingdoms: The World at Heart" already approved for release [2]. - The company is investing in AI technology, launching a game AI development platform "SOON" to enhance development efficiency and exploring AI applications in gaming [2]. Earnings Forecast - The company is expected to have an EPS of 1.05 yuan in 2025, 1.19 yuan in 2026, and 1.35 yuan in 2027, with corresponding P/E ratios of 21, 19, and 17 respectively [3].

Core Viewpoint - The year 2025 marks a milestone for the company, achieving a significant turnaround with a net profit of RMB 650 million in the first half, compared to a net loss of RMB 385 million in the same period last year, indicating robust business fundamentals and a successful strategic transition [1][2]. Group 1: AI+Game Strategy - The company has fully implemented its "AI+Game" strategy, enhancing marketing and operational efficiency through deep integration of AI technology across the game distribution and operation chain [2]. - The self-developed intelligent advertising system "Luoshu" and analysis system "Hetu" have significantly improved advertising precision and resource utilization [2]. - AI applications extend to user operations and customer service, optimizing user retention and payment conversion through behavior prediction and personalized recommendations [2]. Group 2: Overseas Market Growth - The rapid expansion of high-margin overseas business has become a new highlight for the company's performance, with successful game launches in various international markets [3]. - The company has successfully launched over 30 multilingual products in regions such as Southeast Asia, Hong Kong, Macau, Taiwan, Japan, South Korea, Europe, and the Middle East [3]. - Recent game releases, such as "Hot Blood Jianghu: Return," have achieved top rankings in multiple countries, showcasing the company's adaptability and global influence [3]. Group 3: Core Product Maturity - The company has developed a portfolio of mature products that provide stable revenue and user bases, significantly reducing customer acquisition costs [4]. - Classic game titles like "Legend," "Miracle MU," and "Hot Blood Jianghu" continue to contribute stable revenue streams and user engagement [4]. Group 4: Strategic Investments and Collaborations - The company enhances ecological synergy and resource integration through financial asset investments and strategic collaborations, focusing on deep cooperation within the gaming industry, IP development, and AI technology [6]. - The company has accumulated a substantial IP reserve, including over ten major IPs, ensuring a continuous pipeline of new game releases and maintaining brand relevance [6]. Group 5: Brand and Strategic Transformation - The company has officially changed its name from "Zhongxu Future" to "Tanwan," aligning its brand with market recognition and enhancing brand value [7]. - This rebranding reflects a strategic transformation aimed at improving competitiveness in both domestic and international markets [7]. - The company has established a clear and sustainable growth model through AI empowerment, overseas expansion, core business optimization, and strategic investments [7].

Summary of Key Points from the Conference Call Company Overview - **Company**: Kaiying Network - **Industry**: Gaming Core Business and Strategic Direction - Kaiying Network focuses on the gaming industry, relying on four core businesses: R&D, publishing, investment, and IP management, aiming to create high-quality games [2][5] - The XY publishing platform has launched over 100 premium mobile games across various genres, including role-playing and simulation [2][6] Financial Performance - In the first half of 2025, Kaiying Network achieved a revenue of 2.578 billion yuan, a year-on-year increase of 0.89%, and a net profit attributable to shareholders of 950 million yuan, up 17.41% [3] - Total assets reached 10.036 billion yuan, growing by 25.04% compared to the end of the previous year [3] Global Expansion and Revenue Growth - The company actively pursued global publishing, with overseas revenue of 202 million yuan, a year-on-year increase of 59.57% [4][13] - Successful games in overseas markets include "Monster Alliance," "MU Immortal," and "Party Uncontrolled," achieving top rankings in various regions [4][13] IP Strategy - The company has accumulated numerous well-known IP licenses, including "Mobile Suit Gundam" and "Overlord," and is incubating original IPs rooted in traditional Chinese culture [2][7] - Plans to expand IP through short dramas, cultural tourism, and international strategies [2][7] AI and AR Developments - Launched an AR full-process development platform for the gaming industry, significantly shortening development cycles [2][8] - Introduced the "Warm Heart Valley Dream Journey" AR brand and the "Dapeng AR glasses," integrating AI for intelligent interaction [2][8] Future Product Development - The Eve product aims to build long-term emotional connections using a self-developed multi-modal interaction system, with a female version planned for Q4 2025 [10][12] - The company plans to continue launching new products and enhancing AI applications to drive growth [9] Shareholder Engagement and Financial Policies - Major shareholders and executives committed to not reducing their holdings for five years and used dividends for share buybacks, totaling 131 million yuan [4][14] - The company plans to distribute 214 million yuan in cash dividends as part of its profit distribution plan for 2024 [4][14] Market Trends and Competitive Landscape - The gaming industry is experiencing increased competition, with rising user acquisition costs due to a surge in game approvals and support from the government [27][28] - The company is diversifying its marketing strategies, including leveraging live streaming for promotion [27] Future Growth Areas - Future growth will focus on enhancing existing products, particularly nostalgic games, and expanding new product categories [27] - The company aims to strengthen its position in the "Legend Box" platform and enhance user engagement [30][31] Conclusion - Kaiying Network is strategically positioned in the gaming industry with a focus on high-quality game development, global expansion, and innovative use of technology, while maintaining strong financial health and shareholder engagement [2][3][4][5][6][7][8][9][10][12][14][27][28][30][31]

Core Viewpoint - The report highlights the strong performance of Kaiying Network in H1 2025, driven by the growth of its game box and overseas business, and suggests a buy rating due to the company's increasing investment value through share repurchase and management confidence in future growth [1][5]. Financial Performance - In H1 2025, the company achieved revenue of 2.578 billion yuan, a year-on-year increase of 0.89%, and a net profit attributable to shareholders of 950 million yuan, up 17.41% [2]. - In Q2 2025, revenue was 1.225 billion yuan, a decline of 1.80% year-on-year, while net profit increased by 12.79% to 432 million yuan [2]. Business Growth Drivers - The growth in revenue and net profit is attributed to: 1. Steady operation of classic games like "Original Legend" and "Angel Battle" [2]. 2. Significant growth in game box services, with a 65.33% increase in revenue from information services [2]. 3. Strong overseas performance, with international revenue reaching 202 million yuan, a 59.57% increase, driven by successful game launches [2]. Future Outlook - The company expects the performance of game boxes to gradually improve starting Q3 2025, following exclusive IP authorizations and partnerships with other gaming companies [3]. - The company has a robust pipeline of games across various genres, with 14 games approved for release from January to August 2025 [4]. AI and Technology Initiatives - The company is diversifying into AI, launching an AI development platform for the gaming industry and investing in VR hardware and AI applications [4]. Share Repurchase and Management Confidence - The company plans to repurchase shares with a total fund of 100 million to 200 million yuan, aiming to enhance investment value [5]. - Management has committed to not selling shares from 2024 to 2028 and has already begun increasing their holdings [5]. Earnings Forecast - Revenue projections for 2025-2027 are 6.14 billion, 6.77 billion, and 7.47 billion yuan, with corresponding growth rates of 19.9%, 10.3%, and 10.4% [6]. - Net profit forecasts for the same period are 2.19 billion, 2.52 billion, and 2.82 billion yuan, with growth rates of 34.5%, 14.9%, and 11.9% [6].