Investment Rating - The investment rating for the company is "Buy" (maintained) [1] Core Views - The report highlights strong growth potential driven by the international version of "Heart Town" and the TapTap ecosystem, with expectations for significant revenue increases in the coming years [3][4] - The company achieved a revenue of 5.764 billion HKD in 2025, representing a year-on-year increase of 15%, and a net profit of 1.535 billion HKD, up 89% year-on-year [3] - The report projects net profits for 2026, 2027, and 2028 to be 2.006 billion HKD, 2.387 billion HKD, and 2.632 billion HKD respectively, with corresponding P/E ratios of 13.7, 11.5, and 10.4 [3][4] Financial Summary - Revenue for 2025 was 5,764 million HKD, with a year-on-year growth of 15% [4] - The net profit for 2025 was 1,535 million HKD, reflecting a significant increase of 89% year-on-year [3][4] - The gross margin for 2025 was 73.8%, an increase of 4.4 percentage points compared to the previous year [3] - The net margin improved to 28.7%, up 11.0 percentage points year-on-year [3] - The report forecasts revenues of 6,775 million HKD for 2026, 8,036 million HKD for 2027, and 8,725 million HKD for 2028, with respective year-on-year growth rates of 17.5%, 18.6%, and 8.6% [4]

Investment Rating - The investment rating for the company is "Buy" and is maintained [5]. Core Insights - The company reported a revenue of 5.764 billion (RMB) for 2025, representing a year-on-year increase of 15.0%. The net profit attributable to shareholders was 1.535 billion (RMB), up 89.2% year-on-year, while the adjusted net profit was 1.629 billion (RMB), reflecting an 85.7% increase year-on-year [3][6]. - The gaming business, particularly titles like "Heart Town" and "Ragnarok M: Original Server," showed strong performance, contributing to stable revenue and significant profit margin improvements. In the second half of 2025, TapTap's user growth accelerated slightly, and the platform's advertising effectiveness improved due to upgrades in the advertising system [3][6]. - Long-term products like "Heart Town" are performing well, and with the launch of TapTap's PC version and TapTap Maker, the commercial value of TapTap is expected to continue to be released [3][6]. Summary by Relevant Sections Financial Performance - In 2025, the company achieved a revenue of 5.764 billion (RMB), with a net profit of 1.535 billion (RMB) and an adjusted net profit of 1.629 billion (RMB) [3][6]. - For the second half of 2025, the company reported a revenue of 2.682 billion (RMB), a decrease of 3.9% year-on-year and 13.0% quarter-on-quarter, with a net profit of 780 million (RMB), up 28.7% year-on-year and 3.4% quarter-on-quarter [3][6]. Gaming Business - The gaming revenue for the second half of 2025 decreased by 11.4% year-on-year to 1.725 billion (RMB), with a significant contribution from "Ragnarok M: Original Server" in overseas markets, which saw a 176% year-on-year increase in revenue [6]. - The gross margin for the gaming business improved by 2.2 percentage points year-on-year to 66.8% due to a decrease in the proportion of lower-margin agency products and an increase in self-developed game revenue [6]. TapTap Platform - TapTap's user growth slightly accelerated, with a monthly active user count of 46.323 million, up 3.3% year-on-year and 6.2% quarter-on-quarter [6]. - The revenue from TapTap in the second half of 2025 was 957 million (RMB), reflecting a year-on-year increase of 13.4% and a quarter-on-quarter decrease of 5.3% [6]. - The gross margin for the TapTap platform increased by 3.0 percentage points year-on-year to 88.9% [6]. Operational Efficiency - The company has improved operational efficiency, with a slight decrease in sales expenses to 692 million (RMB) in the second half of 2025, and the sales expense ratio increased to 25.8% [6]. - The overall gross margin for the company increased by 3.7 percentage points year-on-year to 74.6%, with the adjusted net profit margin continuing to improve to 31.1% [6].

Investment Rating - The investment rating for the company is "Buy" and is maintained [7] Core Insights - The company reported a revenue of 5.764 billion (RMB) for 2025, representing a year-on-year increase of 15.0%. The net profit attributable to shareholders was 1.535 billion (RMB), up 89.2% year-on-year, while the adjusted net profit was 1.629 billion (RMB), reflecting an 85.7% increase [2][4] - The gaming business saw strong performance from titles like "Heart Town" and "Ragnarok M: Beginner's Server," contributing to stable revenue and significant profit margin improvements. The user growth on TapTap accelerated slightly in the second half of 2025, alongside increased user engagement and enhanced advertising effectiveness [2][4] Summary by Relevant Sections Financial Performance - In the second half of 2025, the company achieved a revenue of 2.682 billion (RMB), a decrease of 3.9% year-on-year and 13.0% quarter-on-quarter. The net profit attributable to shareholders was 780 million (RMB), up 28.7% year-on-year and 3.4% quarter-on-quarter [4] - The adjusted net profit for the same period was 833 million (RMB), reflecting a year-on-year increase of 30.2% and a quarter-on-quarter increase of 4.7% [4] Gaming Business - The gaming revenue in the second half of 2025 decreased by 11.4% year-on-year to 1.725 billion (RMB), and a quarter-on-quarter decline of 16.7%. However, the overseas performance of "Ragnarok M: Beginner's Server" showed a strong increase, with game operation revenue up 176% year-on-year to 220 million (RMB) [7] - The gross margin for the gaming business improved by 2.2 percentage points year-on-year to 66.8% due to a decrease in the proportion of lower-margin agency products and an increase in self-developed game revenue [7] TapTap Platform - TapTap's user growth slightly accelerated, with the monthly active users (MAU) in China increasing by 3.3% year-on-year and 6.2% quarter-on-quarter to 46.323 million. The platform's revenue in the second half of 2025 was 957 million (RMB), up 13.4% year-on-year but down 5.3% quarter-on-quarter [7] - The gross margin for the TapTap platform improved by 3.0 percentage points year-on-year to 88.9% [7] Operational Efficiency - The company has seen continuous improvement in operational efficiency, with a slight decrease in sales expenses to 692 million (RMB) in the second half of 2025. The sales expense ratio increased slightly to 25.8% [7] - The overall gross margin for the company improved by 3.7 percentage points year-on-year to 74.6%, with the adjusted net profit margin continuing to rise to 31.1% [7] Long-term Product Performance - The overseas version of "Heart Town" launched in January 2026 has shown promising performance, potentially becoming a new long-term product support. The company has also prepared new games like "Ragnarok RO: Guardian of Eternal Love 2" and is focusing on the progress of testing and launching [7] - The launch of TapTap PC version and TapTap Maker aims to enhance service for players and developers, contributing to the growth of the TapTap ecosystem [7]

Investment Rating - The report maintains an "Outperform" rating for the company [3][5][22] Core Insights - The international version of the game "Heart Town" has shown excellent performance, significantly contributing to revenue growth, while the domestic version faced challenges due to high base effects [1][8] - The company has acquired the IP for the "Torchlight" game series, which is expected to enhance profitability in the future [1][8] - TapTap platform revenue increased by 13% year-on-year, driven by improved user engagement and advertising algorithms, although growth has slowed due to limited new game launches in the second half of the year [1][8] Revenue Summary - The company achieved a revenue of 2.68 billion yuan in the second half of the year, a decrease of 4% year-on-year. Game revenue was 1.7 billion yuan, down 11% year-on-year, while TapTap platform revenue was 960 million yuan, up 13% year-on-year [1][8] Profit Summary - Adjusted net profit was 830 million yuan, with a net profit margin of 31%, an increase of 8 percentage points year-on-year. Adjusted EBITDA was 870 million yuan, with an EBITDA margin rising from 26% to 32% [2][9] - The gross profit margin improved to 75%, up 4 percentage points year-on-year, primarily due to strong overseas performance of the RO game and an increased share of higher-margin TapTap revenue [2][9] Shareholder Returns - The company repurchased shares worth 210 million HKD, accounting for 0.6% of total shares [10] Financial Forecasts - Revenue projections for 2026 and 2027 are maintained at 7.3 billion and 8.2 billion yuan, respectively, with an additional forecast of 9.1 billion yuan for 2028. Adjusted net profits for 2026 and 2027 are projected at 2.2 billion and 2.6 billion yuan, respectively [3][22]

Investment Rating - The report maintains an "Outperform" rating for the company [5][22]. Core Insights - The international version of the game "Heart Town" has shown excellent performance, significantly exceeding the domestic version, contributing to the largest growth in 2026. The management emphasizes the need for continuous content updates to retain players [1][8]. - The company acquired the "Torchlight" game series IP at the end of 2025, which is expected to enhance profit margins in the future [1]. - The TapTap platform's revenue increased by 13% year-on-year, driven by improved user engagement and advertising algorithms, although growth has slowed due to limited new game launches in the second half of the year [1][8]. Revenue Summary - The company achieved a revenue of 2.68 billion yuan in the second half of the year, a decrease of 4% year-on-year. Game revenue was 1.7 billion yuan, down 11% year-on-year, primarily due to high base effects from the domestic version [1][8]. - TapTap platform revenue was 960 million yuan, reflecting a 13% increase year-on-year [1][8]. Profit Summary - The adjusted net profit attributable to shareholders was 830 million yuan, with a net profit margin of 31%, an increase of 8 percentage points compared to the previous year [2][9]. - The adjusted EBITDA was 870 million yuan, with an EBITDA margin rising from 26% to 32% [2][9]. - The gross profit margin improved to 75%, up 4 percentage points year-on-year, driven by strong overseas performance and a higher proportion of revenue from the TapTap platform [2][9]. Shareholder Returns - From January 1 to March 26, 2026, the company repurchased shares worth 210 million HKD, accounting for 0.6% of its total shares [10]. Financial Forecasts - Revenue projections for 2026 and 2027 are maintained at 7.3 billion and 8.2 billion yuan, respectively, with an additional forecast of 9.1 billion yuan for 2028 [22]. - Adjusted net profit estimates for 2026 and 2027 are 2.2 billion and 2.6 billion yuan, reflecting increases of 12% and 15% [22]. - The company is expected to have a PE ratio of approximately 13x for 2026 [22].

Investment Rating - The report assigns a "Buy" rating to the company with a current price of HKD 63.90 and a fair value of HKD 77.44 [8]. Core Insights - The company has demonstrated strong growth in both its gaming and platform segments, with a notable increase in operational efficiency [3]. - For the fiscal year 2025, the company reported a revenue of RMB 5.764 billion, reflecting a year-on-year growth of 15.0%, and a net profit of RMB 1.535 billion, which is an increase of 89.2% [9]. - The company's self-developed games have shown excellent long-term performance, and the TapTap platform is expected to further drive growth [9]. Financial Projections - Revenue projections for the company are as follows: - 2024: RMB 5.012 billion - 2025: RMB 5.764 billion - 2026: RMB 7.666 billion - 2027: RMB 8.722 billion - 2028: RMB 9.346 billion - The growth rates for these years are projected at 47.9%, 15.0%, 33.0%, 13.8%, and 7.1% respectively [4]. - Non-GAAP net profit is expected to reach RMB 2.020 billion in 2026, RMB 2.367 billion in 2027, and RMB 2.689 billion in 2028, with growth rates of 24.1%, 17.1%, and 13.6% respectively [4]. Business Segments - The gaming segment generated revenue of RMB 3.796 billion in 2025, a year-on-year increase of 10.5%, while the TapTap platform revenue was RMB 1.968 billion, growing by 24.7% [9]. - The gross margin for the company improved to 73.8% in 2025, with the gaming segment's gross margin increasing from 62.6% to 67.4% [9]. Valuation - The report estimates the fair value of the gaming business at RMB 16.547 billion and the community business at RMB 17.271 billion, leading to an overall fair value of RMB 33.818 billion, approximately HKD 38.273 billion [9].

Investment Rating - The report maintains a "Buy" rating for the company [4] Core Insights - The company achieved a revenue of 5.764 billion RMB in 2025, representing a year-on-year growth of 15.0%. The gross profit reached 4.255 billion RMB, with a gross margin of 73.8%, an increase of 4.4 percentage points year-on-year. The net profit attributable to shareholders was 1.535 billion RMB, with an adjusted net profit of 1.629 billion RMB, reflecting a significant year-on-year increase of 85.7% and a profit margin of 28.3% [1][4] Summary by Relevant Sections Company Performance - In 2025, the gaming business generated revenue of 3.796 billion RMB, up 10.5% year-on-year, with operational revenue contributing 3.724 billion RMB. The revenue from online games was 3.596 billion RMB, primarily driven by self-developed games such as "Heart Town" and "Torchlight: Infinite" [2] - The top five revenue-generating games in 2025 were "Heart Town," "Muffin Adventure," "Torchlight: Infinite," "Ragnarok M," and "Iser." "Heart Town" launched its international version in early 2026 and quickly rose to 11th place in Sensor Tower's revenue rankings [2] TapTap Platform - TapTap's advertising revenue for 2025 was 1.968 billion RMB, reflecting a year-on-year growth of 24.7%. The platform's monthly active users (MAU) in China reached 44.97 million, a 2.1% increase year-on-year. The revenue growth was largely attributed to algorithm improvements [3] - The company has enhanced the ecosystem by integrating more games into TapSDK and community services, which has improved user engagement and content differentiation [3] Financial Forecasts - The company forecasts net profits of 2.073 billion RMB for 2026 and 2.384 billion RMB for 2027, with an additional forecast of 2.655 billion RMB for 2028. The projected revenue growth rates for the next few years are 19.3% for 2026, 14.9% for 2027, and 11.7% for 2028 [5][10]

Investment Rating - The industry investment rating is "Positive" and maintained [7] Core Insights - In February, the domestic game market reached a scale of 33.231 billion yuan, with a year-on-year growth rate reaching a nearly 10-month high. Both PC games and overseas performance were particularly strong [2][4] - Recent changes include Apple's reduction of the revenue share, and online games being included in the "14th Five-Year Plan," indicating positive developments in both industry and policy [2][4] Summary by Sections Market Performance - The actual sales revenue of the domestic game market in February 2026 was 33.231 billion yuan, with a month-on-month increase of 2.35% and a year-on-year increase of 18.96%. This growth was driven by several long-standing popular games launching Spring Festival-themed versions and operational activities [9] - The mobile game market reached 22.7 billion yuan in February, with a year-on-year increase of 9.05%. The PC game market saw a remarkable year-on-year growth of 56.75%, reaching 8.87 billion yuan, driven by titles like "Delta Force" [9] - Chinese self-developed games in overseas markets generated actual sales revenue of 2.114 billion USD in February, with a year-on-year increase of 40.46% [9] Industry Developments - Sensor Tower's report indicates that PC games have reached new highs, and mobile games are entering a mature phase, with Chinese game developers becoming significant growth drivers [9] - Apple's commission rate for in-app purchases and paid apps will decrease from 30% to 25%, benefiting game companies. This shift in pricing power from channels to developers/operators may lead to a focus on content and long-term operations [9] - The "14th Five-Year Plan" emphasizes promoting quality online literature, games, and other digital cultural products, indicating ongoing policy support for the gaming industry [9] Investment Recommendations - The report suggests that several new games will see positive developments soon, and there is optimism about the long-term empowerment of the gaming industry by new technologies like AI. The gaming sector is expected to maintain strong product cycles and performance certainty in 2026 [9] - Key investment targets include companies such as KYE Network, Perfect World, Giant Network, 37 Interactive Entertainment, G-bits, Yaoji Technology, Sheng Tian Network, Tencent Holdings, and Xindong Company [9]

Investment Rating - Industry rating: Recommended [4] Core Insights & Investment Recommendations - Tencent has launched a tiered "Lobster" product matrix, promoting OpenClaw as a universal application. This series targets different user groups, creating a complete intelligent ecosystem that includes WorkBuddy for general users, QClaw for remote control via WeChat, and Tencent Cloud Lighthouse for enterprise users [2][20] - Apple has reduced its App Store commission rate in mainland China for the first time in six years, lowering the standard rate from 30% to 25% and the small business plan rate from 15% to 12%. This adjustment reflects a balance of interests between platforms and developers, particularly benefiting small developers and the mini-program ecosystem [3][21] - The rapid development of AI applications, combined with a recovery in entertainment consumption, presents investment opportunities in several areas: leading internet companies in Hong Kong, the gaming industry, and the film and cultural tourism sectors. Beneficiaries include Tencent, Alibaba, and several other companies [6][22] Market Overview - During the 11th week of 2026 (March 9-13), the Shanghai Composite Index fell by 0.7%, while the CSI 300 Index rose by 0.19% and the ChiNext Index increased by 2.51%. The SW Media Index dropped by 3.23%, ranking 26th among 31 industries [1][11] - In the sub-industries, advertising and marketing, film, and broadcasting were the top performers, with increases of 0.99% and 0.54%, while broadcasting saw a decline of 1.45% [1][11] Sub-Industry Data Film Industry - The top three films by box office for the week were "Fast Life 3" with 64.015 million yuan (35.20% market share), "Biao Ren: Wind Rises in the Desert" with 35.836 million yuan (19.70%), and "Silent Awakening" with 32.181 million yuan (17.70%) [23][24] Gaming Industry - The top three iOS games by revenue were "Honor of Kings," "Peacekeeper Elite," and "Delta Force," while the top three Android games were "Heart Town," "Diver Dave," and "Goose Duck Kill" [25][26] TV Series Industry - The top three TV series by broadcast index were "Love in the Pure Age" (80.9), "Zhu Yu" (80.2), and "My Mountain and Sea" (77.5) [27][28] Variety and Animation - The top variety show was "The Universe Sparkles, Please Pay Attention" with a broadcast index of 67.2, followed by "Hello Saturday 2026" and "Now Departing Season 3" [29][30] - The top three animated shows were "Beyond Time" (270.8), "Cang Yuan Tu" (237.4), and "Xian Ni" (237.1) [31]

Investment Rating - Industry rating: Recommended [4] Core Insights & Investment Recommendations - Tencent has launched a tiered "Lobster" product matrix, promoting OpenClaw as a universal application. This series targets different user groups, creating a complete intelligent ecosystem that includes WorkBuddy for general users, QClaw for remote control via WeChat, and Tencent Cloud Lighthouse for enterprise users [2][20] - Apple has reduced the commission rate for the App Store in mainland China from 30% to 25%, and for small business plans from 15% to 12%. This adjustment reflects a balance of interests between platforms and developers, particularly benefiting small developers and the mini-program ecosystem [3][21] - The rapid development of AI applications, combined with a recovery in entertainment consumption, presents investment opportunities in several areas: leading internet companies in Hong Kong, the gaming industry, and the film and cultural tourism sectors. Beneficiaries include Tencent, Alibaba, and several other companies [6][22] Market Overview - In the week of March 9-13, 2026, the Shanghai Composite Index fell by 0.7%, while the CSI 300 Index rose by 0.19% and the ChiNext Index increased by 2.51%. The SW Media Index dropped by 3.23%, ranking 26th among 31 industries [1][11] - The top three sub-industries were advertising and marketing, film, and broadcasting, with respective changes of +0.99%, +0.54%, and -1.45% [1][11] Sub-Industry Data Film Industry - The top three films by box office for the week were "Fast Life 3" with 64.015 million yuan (35.20% market share), "Biao Ren: Wind Rises in the Desert" with 35.836 million yuan (19.70%), and "Silent Awakening" with 32.181 million yuan (17.70%) [23][24] Gaming Industry - The top three iOS games by revenue were "Honor of Kings," "Peacekeeper Elite," and "Delta Force." The top three Android games by popularity were "Heart Town," "Diver Dave," and "Goose Duck Kill" [25][26] TV Series Industry - The top three TV series by broadcast index were "Pure Love in the Era of Innocence," "Zhu Yu," and "My Mountain and Sea," with indices of 80.9, 80.2, and 77.5 respectively [27][28] Variety and Animation - The top variety show was "The Universe Sparkles, Please Pay Attention," followed by "Hello Saturday 2026" and "Now Departing Season 3" [29][30] - The top three animated shows were "Beyond Time," "Cang Yuan Tu," and "Xian Ni," with viewership indices of 270.8, 237.4, and 237.1 respectively [31]