Investment Rating - The report maintains a "Buy" rating for the company [5] Core Views - The new game "Zhang Jian Chuan Shuo" is expected to contribute significantly to revenue in Q3, leading to an upward revision of profit forecasts for 2025, 2026, and 2027 [3] - The company’s target price is set at 460.68 CNY based on a P/E ratio of 22 times the average of comparable companies for 2025 [3] Financial Performance Summary - The company reported a revenue of 1.38 billion CNY in Q2 2025, a year-on-year increase of 34%, primarily driven by new games [9] - The gross margin for Q2 was 93%, up 6 percentage points year-on-year, due to an increase in self-developed games [9] - The net profit attributable to the parent company for Q2 was 360 million CNY, reflecting a year-on-year growth of 37% [9] Profit Forecasts - The projected net profits for the company are 1.508 billion CNY, 1.779 billion CNY, and 1.936 billion CNY for 2025, 2026, and 2027 respectively, with significant growth rates of 59.6%, 17.9%, and 8.8% [3][11] - Earnings per share are expected to be 20.94 CNY, 24.70 CNY, and 26.87 CNY for 2025, 2026, and 2027 respectively [11] Market Position and Product Pipeline - The long-standing game "Wen Dao" has stabilized its revenue, and the new mini-game "Dao You Lai Wa Bao" is anticipated to enhance player engagement [9] - Upcoming new titles, including the SLG game "Jiu Mu Zhi Ye," are expected to have a long lifecycle if successful, with a focus on the competitive Three Kingdoms theme [9]

Investment Rating - The investment rating for the company is maintained as "Buy" with a target price of RMB 565.66 [1][5]. Core Views - The company reported strong H1 performance with revenue of RMB 2.518 billion, a year-on-year increase of 28.49%, and a net profit of RMB 645 million, up 24.50% year-on-year. The growth is attributed to new game contributions [1]. - The company plans to distribute a cash dividend of RMB 66 per 10 shares, totaling approximately RMB 474 million, which represents 73.46% of H1 net profit [1]. - The outlook for the company's domestic game business remains positive, with expectations for continued stable growth and new developments in overseas game operations [1]. Summary by Sections H1 Performance - In H1 2025, the company achieved revenue of RMB 2.518 billion, a year-on-year increase of 28.49%, and a net profit of RMB 645 million, up 24.50% year-on-year. The Q2 results showed revenue of RMB 1.382 billion, a year-on-year increase of 33.89% and a quarter-on-quarter increase of 21.71% [1]. Game Performance - The newly launched game "杖剑传说" generated RMB 424 million in revenue in Q2 2025. The game "问剑长生" also showed strong performance with Q2 revenue of RMB 203 million, reflecting a 42.9% quarter-on-quarter increase [2]. - The company's overseas game revenue in H1 2025 was RMB 201 million, a year-on-year decrease of 21.01%, primarily due to declines in revenue from "飞吧龙骑士" and "一念逍遥" [3]. Financial Metrics - The gross margin for H1 2025 was 92.31%, an increase of 4.10 percentage points year-on-year, attributed to reduced costs from external developers [4]. - The company has adjusted its net profit forecasts for 2025-2027, increasing the estimates to RMB 1.63 billion, RMB 1.82 billion, and RMB 1.93 billion respectively, reflecting a significant upward revision [5]. Valuation - The target price has been adjusted to RMB 565.66 based on a price-to-earnings (PE) ratio of 25 times for 2025, up from a previous target of RMB 376.94 [5].

Core Insights - The company's performance exceeded expectations in Q1 2025, driven by the new game "Wen Jian Chang Sheng," which launched on January 2, 2025, contributing significantly to revenue growth [1] - The company's total revenue for Q1 2025 was 1.136 billion yuan, a year-on-year increase of 22.5%, while net profit attributable to shareholders was 283 million yuan, up 11.8% [1] - The company anticipates that the revenue recognition pace for new games will be better than expected, particularly for "Wen Jian Chang Sheng" [1] Revenue and Profit Analysis - Q1 2025 revenue was 1.136 billion yuan, with a net profit of 283 million yuan, and a non-deductible net profit of 275 million yuan, which surpassed the expected 200 million yuan, marking a 38.7% year-on-year increase [1] - Marketing expenses increased to 31.7% of revenue, while R&D expenses decreased to 15.9%, and management expenses were at 9.7%, aligning with expectations [1] Game Performance - The core game "Wen Dao" saw a monthly average revenue of 110 million yuan, down 16.2% year-on-year, while the mobile version generated 147 million yuan, down 15.8% [2] - The new game "Wen Jian Chang Sheng" achieved a monthly average revenue of 121 million yuan in Q1 2025, totaling 363 million yuan [2] - The overseas gaming business reported a total revenue of 117 million yuan in Q1 2025, a decrease of 15.95% year-on-year [2] Future Game Releases - The self-developed game "Zhang Jian Chuan Shuo" is expected to launch in H1 2025, while the agency-operated game "Jiu Mu Zhi Ye" is anticipated to launch in H2 2025 in mainland China [2] Profit Forecast and Valuation - The company projects net profit growth of 7.86%, 11.87%, and 12.33% for 2025-2027, reaching 1.019 billion yuan, 1.140 billion yuan, and 1.281 billion yuan respectively [2] - The current stock price corresponds to a PE ratio of 15X, 14X, and 12X for 2025-2027 [2]