Core Insights - The Chinese mini-game market is experiencing significant growth, with actual sales revenue reaching 23.276 billion yuan in the first half of 2025, a year-on-year increase of 40.2%, far exceeding the mobile game market's growth rate of 16.55% [1] - The company, 37 Interactive Entertainment, is actively seeking transformation by expanding from gaming into artificial intelligence, quality education, and global distribution, aiming to create a future-oriented global entertainment technology ecosystem [1] Group 1: Market Trends - The mini-game market is projected to exceed 60 billion yuan in size by 2025, indicating that it remains unsaturated compared to the slowing mobile game market [1] - The company is reducing its reliance on traditional user acquisition methods and is focusing on technology-driven content efficiency through AI and data platforms [2] Group 2: Product Development - The company is enhancing its long-term operational capabilities for existing games, with titles like "Seeking the Path of the Universe" and "Time Grocery Store" effectively extending game lifecycles through various engagement strategies [3] - New products are achieving impressive results, with "Time Explosion" reaching the top of the iOS free chart upon launch, and "Heroes Have No Flash" quickly entering the top five of the iOS sales chart [4] Group 3: R&D and Global Strategy - The company is expanding its self-developed capabilities and diversifying its product line, forming a rich external development reserve through partnerships with quality developers [5] - 37 Interactive Entertainment has established itself as a leading global game publisher, successfully distributing numerous titles across over 200 countries and regions [7][8] Group 4: Talent Strategy - The company offers a comprehensive employee welfare system, including an enhanced insurance package and housing support for employees who have been with the company for over two years [9][10] - A focus on work-life balance is evident through policies like double weekends and early leave on certain holidays, alongside a robust talent development program [12][18] Group 5: Future Outlook - The company is committed to building a long-term competitive advantage through technological innovation, quality development, global distribution, ESG governance, and talent development strategies [26] - 37 Interactive Entertainment aims to enhance its global cultural expression and maintain a long-term perspective to improve the quality of cultural output [26]

2025年上半年，中国小游戏市场以232.76亿元销售收入、40.2%的同比增速，成为远超手游市场 （16.55%增速）的行业新增长极，600亿元规模的市场潜力正加速释放。 面对行业过度买量、管理粗放、产品生命周期短等突出痛点，三七互娱跳出单一游戏赛道局限，以"技 术革新、精品研发、品牌价值升级"为核心战略，全面拓展素质教育、人工智能、全球发行等多元业 务，在布局全球化盈利网络的同时，构建起抗风险能力与竞争力兼具的娱乐科技生态，为企业可持续发 展筑牢根基。 一、技术创新与买量转型：以长期主义打造精准营销新时代 随着老游戏进入成熟期，公司逐步降低粗放式买量比重，以技术赋能内容效率，通过 AI 大模型、数据 平台、素材自动化生成工具 等方式，实现买量智能化及营销链路降本增效。 1、存量游戏的长线运营能力持续强化 《寻道大千》以联动多IP模式实现多维突破，《时光杂货店》通过公益联动、城市巡游等内容有效延长 游戏生命周期。自研三国题材策略手游《霸业》通过开启S7赛季、新版副本玩法等促进玩家长线玩法 体验和留存，为公司SLG产品长线运营积累经验。 品牌荣誉与行业认可 三七互娱近年来获评多项国家级与行业级荣誉，包括： ● ...

Core Viewpoint - Company reported a decline in revenue for the first half of 2025, but a significant increase in net profit, indicating improved profitability despite revenue challenges [1][2] Financial Performance - For the first half of 2025, the company achieved revenue of 8.486 billion yuan, a year-on-year decrease of 8.08%, while net profit attributable to shareholders was 1.4 billion yuan, an increase of 10.72% [1] - In Q2 2025, the company reported revenue of 4.243 billion yuan, down 5.33% year-on-year, but net profit increased by 31.24% to 851 million yuan [1][2] - The company announced a cash dividend of 2.10 yuan per share, totaling 926 million yuan for the first half of 2025, representing 66% of net profit [1] Cost Management and Profitability - The significant improvement in Q2 2025 net profit was attributed to a reduction in sales expenses, which decreased by 19.3% to 1.99 billion yuan [1] - The sales expense ratio fell by 8.1 percentage points to 46.9%, primarily due to the transition of key games into maturity, leading to reduced marketing spend [1] - AI-driven advertising has enhanced the efficiency of user acquisition, with AI advertising accounting for 50% of total ad spend, improving efficiency by 70% [1] Product Performance and Future Outlook - The decline in Q2 revenue was influenced by the introduction of new games, which are still in the launch phase, compared to stable revenue from mature games in the previous year [2] - The company is set to launch its self-developed game "Douluo Dalu: Hunting World," which has already topped the iOS free chart, expected to contribute to revenue in Q3 [2] - The company has a rich product pipeline, with a focus on the release schedule of new games, including various genres such as SLG and MMORPG [2] Investment Outlook - Projections for 2025-2027 indicate revenues of 18.838 billion, 20.322 billion, and 21.546 billion yuan, with net profits of 2.931 billion, 3.334 billion, and 3.819 billion yuan respectively [2] - The company is expected to maintain a "buy" rating due to its recovering user acquisition costs and promising new game performance [2]

Investment Rating - The report maintains a "Buy" rating for the company, indicating an expected stock price increase of over 15% relative to the industry index in the next six months [4][16]. Core Views - The company is experiencing a recovery in profits due to reduced sales expenses and improved advertising efficiency through AI, with a notable 31.24% year-on-year increase in net profit for Q2 2025 [2][3]. - The company has a rich product pipeline, with several new games expected to contribute to revenue growth, particularly the self-developed game "Douluo Dalu: Hunting Soul World" which has already topped the iOS free chart [3][2]. - The financial outlook for the company is positive, with projected revenues and net profits increasing steadily from 2025 to 2027, alongside a decreasing P/E ratio, indicating potential for value appreciation [3][4]. Financial Summary - For 2023, the company reported revenue of 16,547 million yuan, with a slight growth rate of 0.9% year-on-year. The net profit attributable to the parent company was 2,659 million yuan, reflecting a decline of 10.0% year-on-year [1]. - The forecast for 2025 estimates revenue to reach 18,838 million yuan, with a growth rate of 8.0%, and net profit expected to be 2,931 million yuan, marking a 9.7% increase [1][3]. - The company's return on equity (ROE) is projected to remain strong, around 19.3% in 2025, while the earnings per share (EPS) is expected to grow from 1.20 yuan in 2023 to 1.33 yuan in 2025 [1][3]. Product and Market Position - The company has a diverse product portfolio, including self-developed and licensed games, with a significant focus on SLG and MMORPG genres. The upcoming releases are anticipated to enhance revenue streams [3][2]. - The company has successfully reduced its sales expenses by 19.3% in Q2 2025, contributing to improved profit margins and overall financial health [2][3].

Core Viewpoint - The financial report of 37 Interactive Entertainment (002555) for the first half of 2025 shows a mixed performance, with net profit increasing by 10.72% year-on-year, while total revenue decreased by 8.08% [1] Financial Performance Summary - Total revenue for the first half of 2025 was 8.486 billion yuan, down 8.08% from 9.232 billion yuan in the same period of 2024 [1] - Net profit attributable to shareholders reached 1.4 billion yuan, an increase of 10.72% compared to 1.265 billion yuan in 2024 [1] - Gross margin stood at 76.71%, a decrease of 3.67% year-on-year, while net margin improved to 16.51%, up 20.51% [1] - Total expenses (selling, administrative, and financial) amounted to 4.62 billion yuan, accounting for 54.44% of revenue, down 9.94% from the previous year [1] - Earnings per share (EPS) increased to 0.64 yuan, a rise of 12.28% from 0.57 yuan [1] Cash Flow and Financial Position - Cash and cash equivalents increased significantly by 166.00%, attributed to a net inflow from investment activities [8] - Operating cash flow decreased by 17.65%, due to a reduction in cash received from sales and services [5] - The company’s net assets per share rose to 5.88 yuan, reflecting a 3.06% increase [1] Changes in Key Financial Items - Prepayments increased by 68.44% due to new game launches and increased prepayments for internet traffic and game copyrights [3] - Accounts payable rose by 66.06%, indicating an increase in supplier payments settled through bank acceptance bills [3] - Operating income decreased by 8.08% due to the lifecycle stage of game products, with new games in the introduction phase contributing less than mature titles from the previous year [3] Expense Management - Selling expenses decreased by 17.73% as previously growing games entered maturity, leading to reduced marketing spend [4] - Financial expenses fell by 15.91% due to increased foreign exchange gains compared to the previous year [5] Investment and Fund Holdings - The company’s return on invested capital (ROIC) was reported at 16.28%, indicating strong capital returns [9] - Various ETFs have increased their holdings in 37 Interactive Entertainment, with the largest being the Huaxia CSI Animation Game ETF, which holds 36.9369 million shares [12]

Core Viewpoint - The company reported a decline in revenue for the first half of 2025, but showed improvement in net profit, indicating a potential for recovery and growth in the future [1][2]. Financial Performance - In H1 2025, the company achieved revenue of 8.486 billion yuan, a year-over-year decrease of 8.08%, while net profit attributable to shareholders was 1.4 billion yuan, an increase of 10.72% year-over-year [1]. - Q2 2025 revenue was 4.243 billion yuan, down 5.33% year-over-year and flat compared to Q1 2025, with net profit of 851 million yuan, up 31.24% year-over-year and 54.97% quarter-over-quarter [1]. - The company plans to distribute a cash dividend of 2.10 yuan per 10 shares, totaling 924 million yuan, which represents approximately 66% of the net profit for the period [1]. Product and Market Strategy - The mobile gaming business generated revenue of 8.239 billion yuan in H1 2025, a decline of 8.03% year-over-year, with a peak monthly revenue of approximately 2.2 billion yuan from globally released mobile games [2]. - The company has several new products set to launch in early 2025, including "Time Explosion" and "Heroes Without Flash," which are expected to perform well [2]. - The company is focusing on a strategy of "premiumization, diversification, and globalization" to enhance its core competitiveness in the market [2][3]. Product Development and Innovation - The company is set to launch its self-developed game "Douluo Dalu: Soul World" in July 2025, which is the first 3D realistic MMORPG based on the Douluo IP [3]. - The company has a rich reserve of IPs for game adaptations, including "Doupo Cangqiong" and "Guimi Zhi Zhu," and is developing various game types to diversify its product offerings [3]. - The company is upgrading its AI capabilities, building an AI empowerment ecosystem centered around its self-developed industry model "Xiao Qi" [3]. Cost Management and Profitability - The gross margin for H1 2025 was 76.71%, a decrease of 2.92 percentage points year-over-year, influenced by increased operating costs, particularly in game revenue sharing [4]. - The sales expense ratio decreased to 51.97%, down 6.09 percentage points year-over-year, as mature games required less marketing expenditure [4]. - The net profit margin increased by 2.81 percentage points year-over-year to 16.51%, indicating improved profitability despite revenue challenges [4]. Earnings Forecast and Valuation - The company forecasts net profits of 2.831 billion yuan, 3.137 billion yuan, and 3.429 billion yuan for 2025, 2026, and 2027, respectively, with corresponding EPS of 1.28, 1.42, and 1.55 yuan [5]. - Based on a relative PE valuation method, the target price has been adjusted to 23.04 yuan, reflecting an 18 times PE for 2025, up from a previous target of 19.33 yuan [5].

Investment Rating - The investment rating for the company is maintained as "Buy" [1] Core Views - The company reported a revenue of 8.486 billion RMB for H1 2025, a year-over-year decrease of 8.08%, while the net profit attributable to shareholders was 1.4 billion RMB, an increase of 10.72% year-over-year [1] - The second quarter showed significant improvement with a revenue of 4.243 billion RMB, down 5.33% year-over-year but with a net profit of 0.851 billion RMB, up 31.24% year-over-year [1] - The company plans to distribute a cash dividend of 2.10 RMB per 10 shares, totaling 0.924 billion RMB, which represents approximately 66% of the net profit for the period [1] - The company is optimistic about its product operational capabilities and overseas expansion potential, maintaining a "Buy" rating [1] Revenue and Product Performance - The mobile gaming business generated 8.239 billion RMB in H1 2025, a decline of 8.03% year-over-year, with the highest monthly revenue from global releases reaching approximately 2.2 billion RMB [2] - New products launched in early 2025, such as "Time Explosion" and "Heroes Don't Flash," performed well, while long-term products continued to contribute to revenue [2] - Overseas revenue was 2.724 billion RMB, down 6.01% year-over-year, accounting for 32.10% of total revenue [2] Product and IP Development - The company has a rich reserve of products and IPs, including adaptations of popular titles like "Douluo Dalu" and "Doupocangqiong" [3] - The self-developed game "Douluo Dalu: Hunting Soul World" has entered public testing, aligning with the company's strategy of product excellence [3] - The company is enhancing its AI capabilities, building a comprehensive AI-enabled ecosystem centered around its self-developed industry model "Xiao Qi" [3] Financial Metrics and Profitability - The gross margin for H1 2025 was 76.71%, a decrease of 2.92 percentage points year-over-year, influenced by increased operating costs [4] - The sales expense ratio decreased by 6.09 percentage points to 51.97%, as previous growth-phase games entered maturity, leading to reduced traffic investment [4] - The net profit margin increased by 2.81 percentage points year-over-year to 16.51% due to reduced sales expenses [4] Profit Forecast and Valuation - The company forecasts net profits of 2.831 billion RMB, 3.137 billion RMB, and 3.429 billion RMB for 2025, 2026, and 2027 respectively, with corresponding EPS of 1.28 RMB, 1.42 RMB, and 1.55 RMB [5] - The target price is adjusted to 23.04 RMB based on an 18x PE valuation for 2025, up from a previous target of 19.33 RMB [5]