Group 1: Game Approval and Market Trends - In September 2025, a total of 145 domestic online games were approved, including 93 mobile games, 42 mobile-casual puzzle games, 7 mobile-client games, 2 client games, and 1 mobile-web game [2] - The cumulative number of game licenses issued by the National Press and Publication Administration in 2025 has reached 1275, maintaining a high issuance frequency [2] - The regular issuance of game licenses reflects the regulatory support for the development of the gaming industry [2] Group 2: Company Performance and Financing - Kunlun Wanwei achieved a revenue of 3.733 billion yuan in the first half of 2025, a year-on-year increase of 49.23%, with ongoing optimization of AI game products [6] - Sanqi Interactive Entertainment reported a revenue of 8.486 billion yuan in the first half of 2025, a year-on-year decrease of 8.08%, but a net profit of 1.4 billion yuan, up 10.72% [6] - Financing net purchases for game stocks in September exceeded 1 billion yuan for three companies: Kunlun Wanwei (760 million yuan), Sanqi Interactive Entertainment (544 million yuan), and Giant Network (153 million yuan) [3] Group 3: Profitability and Growth - The net profit rankings for the first half of 2025 show ST Huatuo, Sanqi Interactive Entertainment, Kaiying Network, Giant Network, and G-bits leading with net profits of 2.656 billion yuan, 1.4 billion yuan, 950 million yuan, 777 million yuan, and 645 million yuan respectively [6] - Significant year-on-year net profit growth was observed in companies such as Shengtian Network (1186.02%), Youzu Network (989.31%), and Zhejiang Shuju Culture (156.26%) [7] - Kaiying Network's game "Black Cat Detective: Guardian" received approval in September, contributing to its overseas revenue of approximately 202 million yuan, a year-on-year increase of 59.57% [6]

Competitive Advantages - The company focuses on the core strategy of "focusing on the gaming industry," aiming to create high-quality games that meet market demands, supported by a business system of "R&D, publishing, investment + IP" [2] - The company has established an overseas publishing strategy, leading to a continuous increase in overseas revenue over the past three years [2][4] Overseas Business Performance - In 2023, overseas revenue reached 117 million CNY, accounting for 2.71% of total revenue, with a year-on-year growth of 619.54% [4] - In 2024, overseas revenue is projected to be 375 million CNY, representing 7.32% of total revenue, with a year-on-year growth of 221.48% [4] - In the first half of 2025, overseas revenue was 202 million CNY, making up 7.82% of total revenue, with a year-on-year growth of 59.57% [4] Successful Overseas Products - The game "Monster Alliance" launched on March 25, 2025, quickly rose to Top 2 on the App Store free chart in South Korea [5] - "MU Immortal," launched on May 20, 2025, topped the iOS RPG free chart in multiple countries on its release day [5] - "Party Beast Control," launched on May 22, 2025, achieved first place in iOS downloads in Hong Kong and Taiwan on its launch day [6] Information Service Revenue - Information service revenue includes income from game resource distribution, community services, and promotional services, totaling 657 million CNY in the first half of 2025 [7] Unique Features of Legend Box - Legend Box is a vertical community platform focused on the needs of "Legend" game users, integrating game experience, community interaction, and live streaming [8] New Developments in Legend Box - In July 2025, a licensing agreement was signed for "Legend" and "Legend World," allowing for exclusive development and operation of related products [10] - Over 25 high-quality "Legend" games have been integrated into Legend Box, with plans to introduce over 100 more [10] Shareholder Information - As of September 10, 2025, the total number of shareholders is 53,848, showing a recent overall decrease [10] Arbitration and Financial Impact - The company won an arbitration case against Yumeide, but cannot confirm income from the receivable until the payment situation is clear [11] - The increase in the stock price of Century Huatong will enhance the company's net assets but will not affect current profits [12] Commitment to Shareholder Value - The major shareholder and executives have committed to using dividends for share buybacks from 2024 to 2028, with significant amounts already invested [13]

Investment Rating - The report maintains a "Buy" rating for the company [10] Core Views - The company achieved a revenue of 1.225 billion yuan in Q2 2025, a year-on-year decrease of 1.80%, while the net profit attributable to the parent company was 432 million yuan, an increase of 12.79% year-on-year [2][5] - The company has a rich pipeline of new games and is actively advancing its AI initiatives, which are expected to benefit from related catalysts [2][8] Summary by Sections Financial Performance - In H1 2025, the company reported a total revenue of 2.578 billion yuan, a year-on-year increase of 0.89%, and a net profit attributable to the parent company of 950 million yuan, up 17.41% year-on-year [5][6] - Q2 2025 saw a slight decline in revenue due to fewer new game launches, but the "Legend Box" and overseas markets continued to grow rapidly, with overseas revenue increasing by 60% to 200 million yuan [6][8] Cost and Profitability - The company's sales expenses decreased by 13.7% year-on-year to 407 million yuan in Q2, resulting in a sales expense ratio of 33.3% [7] - The gross margin and net profit margin for Q2 were 81% and 35%, respectively, maintaining a high level of profitability [7] Future Growth Drivers - The company has partnered with several gaming companies to establish brand zones within the "Legend Box," which is expected to gradually enhance performance [8] - Upcoming game releases, including "Blood of Jianghu: Return" and others, are anticipated to drive revenue growth [8] - The company is making significant strides in AI, with projects like the 3D AI companion application "EVE" and the AI game development platform "SOON" expected to advance towards commercialization [8] Share Buyback Plan - The company plans to initiate a share buyback program with a total fund of up to 200 million yuan, aiming to repurchase shares at a price not exceeding 29.33 yuan per share [8] Earnings Forecast - The company is projected to achieve net profits of 2.16 billion yuan and 2.44 billion yuan in 2025 and 2026, respectively, corresponding to PE ratios of 23.0 and 20.4 [8]

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].

Performance Overview - In H1 2025, the company achieved operating revenue of 2.578 billion yuan, 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 [1] - The net profit excluding non-recurring items was 939 million yuan, reflecting a year-on-year growth of 17.18% [1] - The company announced a share buyback plan, intending to repurchase 0.16%-0.32% of its total shares, with a total fund of 100 million to 200 million yuan, at a price not exceeding 29.33 yuan per share [1] New Game Releases and Market Response - The mobile game "Dragon Valley World" launched in February 2025, achieving top rankings on App Store and overall charts [2] - In April 2025, the mobile game "Digimon: Source" received positive market feedback and attention [2] - A total of 11 new games received approval for release in H1 2025, enhancing the company's product pipeline [2] Global Expansion and Performance - The mobile game "Monster Alliance" launched in March 2025, ranking high on multiple platforms in South Korea [3] - "MU Immortal" was released in May 2025 across over 100 countries, achieving top rankings in several regions [4] - The game "Party Beast Control" attracted over a million pre-registrations before its launch in Hong Kong, Macau, and Taiwan [4] AI and Technology Development - The company has made significant advancements in AIGC technology, with several algorithms and models approved for use [5] - The AI application ecosystem has been integrated with DeepSeek R1, enhancing capabilities for future commercialization [5] Profit Forecast - Projected operating revenues for 2025-2027 are 6.142 billion, 6.940 billion, and 7.704 billion yuan, with year-on-year growth rates of 20%, 13%, and 11% respectively [6] - Expected net profits for the same period are 2.105 billion, 2.411 billion, and 2.707 billion yuan, with growth rates of 29.3%, 14.5%, and 12.3% respectively [6] - The current market capitalization corresponds to a PE ratio of 24, 21, and 18 for the years 2025, 2026, and 2027 [6]

Investment Rating - The report maintains a "Buy" rating for the company with a target price of RMB 23.88 [5][8]. Core Insights - The company is actively expanding its overseas market presence and has a strong pipeline of new products, including the anticipated internal testing of the AI emotional companion application "EVE" [1][4]. - The successful launch of new games, such as "Dragon Valley World" and "Digital Monster: Source," has garnered significant market attention, indicating the company's ability to leverage classic IPs and innovate gameplay [2]. - The company's overseas mobile game "Party Beast Control" achieved top rankings in various regions shortly after its launch, showcasing its effective market strategy and user growth potential [3]. Summary by Sections Product Performance - The new game "Dragon Valley World" topped the App Store free games chart on its first day of public testing and remains a strong performer in the iOS action game category [2]. - "Digital Monster: Source" has also gained traction, ranking 73rd in the iOS adventure game category as of June 3, 2025 [2]. Overseas Expansion - The company launched "Party Beast Control" in Hong Kong, Taiwan, and Macau, achieving top download rankings in these regions [3]. - "MU Immortal" was released in over 100 countries, topping the RPG free charts in Canada and Germany, indicating successful international market penetration [3]. AI Technology Integration - The company is investing in AI technology, with the upcoming "EVE" game expected to enhance user engagement through multi-platform interactions [4]. - The new brand "Warm Star Valley Dream Journey" combines AI technology with interactive experiences, aiming to attract a broader audience [4]. Financial Forecast - The company forecasts net profits of RMB 20.4 billion, RMB 24.1 billion, and RMB 27.3 billion for 2025, 2026, and 2027 respectively, with a PE ratio of 25X for 2025 [5][7]. - Revenue is projected to grow from RMB 4.295 billion in 2023 to RMB 6.910 billion by 2027, reflecting a compound annual growth rate [7][19].