Summary of the Conference Call on the Gaming Sector Industry Overview - The gaming sector in A-shares has shown strong performance in August 2025, continuing a positive trend since the beginning of the month, significantly outperforming other sectors in September [2][3][5]. Key Companies and Products - **ST Huatuo**: - "Wild Survival" achieved over $200 million in global revenue in August, a 17% month-over-month increase, with overseas iOS and Google Play contributing over $150 million, up 21% [1][2]. - "King Shot" generated $77.6 million in August, a 26% increase [2]. - "Tasty Travels" maintained a steep growth trajectory, reaching nearly $10 million in August, with a 24% month-over-month increase [2]. - **Giant Network**: - "Supernatural" has shown outstanding performance since the first half of 2025, with domestic iOS revenue in August increasing by 73% [4]. - **G-bits**: - "Sword of the Hero" performed well in overseas markets, with a 62% month-over-month increase in Hong Kong, Macau, and Taiwan, and a 116% year-over-year increase in Japan [4]. - **Xindong Company**: - The performance was driven by older games, with "Xindong Town" reaching a new high in July due to anniversary celebrations and IP collaborations [1][4]. - **Perfect World**: - "P5X Persona" exceeded expectations in Japan, contributing significantly to revenue growth, with overseas revenue in July between 140 million to 150 million RMB, and around 80 million RMB in August [1][8]. Financial Performance - In Q2 2025, 25 major A-share gaming companies reported total revenue of 27.9 billion RMB, a 23% year-over-year increase and a 4% quarter-over-quarter increase, significantly outperforming the overall domestic gaming industry growth of 10% year-over-year and -4% quarter-over-quarter [11]. - Net profit attributable to shareholders totaled 4.6 billion RMB, a 100% year-over-year increase and a 25% quarter-over-quarter increase [11]. Profitability Metrics - The gaming sector's gross margin was 68% in Q2 2025, up 3 percentage points year-over-year and 2 percentage points quarter-over-quarter, attributed to high-quality products reducing reliance on traditional channels [3][12]. - Sales expense ratio remained stable at 33%, indicating that revenue growth was not solely dependent on user acquisition spending [3][13]. Future Outlook - The gaming sector is expected to continue its growth trajectory in the second half of 2025 and into 2026, driven by several factors: - Continued strong performance of existing popular games and new product launches [5][6]. - Expansion into international markets and new game releases, such as ST Huatuo's upcoming titles [5][6]. - Increasing demand for digital entertainment and technological advancements enhancing user experience [6]. - The valuation of the sector remains reasonable, with a central estimate below 20 times earnings, suggesting potential for continued outperformance [15]. Noteworthy Trends - The application of AI in game development and marketing is expected to enhance efficiency and quality, with significant portions of advertising content being produced by AI [15]. - Companies with strong product lines and forward-looking AI strategies, such as ST Huatuo, Giant Network, G-bits, and Perfect World, are recommended for attention [17]. Additional Insights - Older games have shown resilience, with several maintaining stable revenue streams, indicating a potential for sustained performance [7][10]. - The competitive landscape has improved, with companies leveraging community marketing and content-driven strategies to reduce traditional user acquisition costs [14]. This summary encapsulates the key points from the conference call regarding the gaming sector, highlighting the performance of specific companies, financial metrics, and future outlooks.

Investment Rating - The investment rating for the company is "Buy" and is maintained [7]. Core Views - The company reported a significant revenue increase of 38.8% year-on-year, reaching 3.082 billion yuan in the first half of 2025, with a remarkable net profit growth of 268.0% to 755 million yuan [2][4]. - The performance of games such as "Heart Town" and "Ragnarok M: Original Server" has driven revenue growth and significantly improved profit margins [2][7]. - The TapTap platform has shown high revenue growth due to algorithm upgrades and increased user engagement, indicating ongoing commercial potential [2][7]. - The company has a strong pipeline of new games and is expanding its presence in the PC gaming sector, which is expected to enhance community commercialization potential [2][7]. Summary by Sections Financial Performance - In the first half of 2025, the company achieved a revenue of 3.082 billion yuan, a year-on-year increase of 38.8%, and a net profit of 755 million yuan, up 268.0% [2][4]. - Adjusted net profit reached 796 million yuan, reflecting a year-on-year increase of 235.3% [2][4]. Game Business - The game revenue increased by 39.4% year-on-year to 2.071 billion yuan, with a sequential increase of 6.3% compared to the second half of 2024 [7]. - The average monthly active users (MAU) and paying users increased by 19.7% and 21.1% year-on-year, reaching 11.409 million and 1.322 million, respectively [7]. - The gross margin for the game business improved by 8.0 percentage points year-on-year to 68.0% [7]. TapTap Platform - TapTap's revenue grew by 37.6% year-on-year to 1.011 billion yuan, benefiting from improved advertising algorithms and user engagement [7]. - The MAU for TapTap in China increased by 0.9% year-on-year to 43.625 million, while the international version saw a slight decline [7]. Operational Efficiency - The company improved its operational efficiency, with a decrease in sales expense ratio by 7.2 percentage points year-on-year to 24.1% [7]. - The overall gross margin increased by 5.7 percentage points year-on-year to 73.1%, leading to a significant improvement in net profit margin to 25.8% [7]. Future Outlook - The company has several promising new game releases planned, including the overseas version of "Heart Town" and the next-generation title "Ragnarok RO: Guardian of Eternal Love 2" [7]. - TapTap is focusing on increasing the number of PC games, which is expected to drive growth in the community commercialization potential [7].

Core Viewpoint - Xindong Company (02400) has experienced a nearly 4% increase in stock price, attributed to a positive earnings forecast, with expected revenue and net profit for the first half of the year being at least 3.05 billion and 790 million respectively [1] Group 1: Earnings Forecast - Xindong Company has issued an earnings surprise, leading to market optimism regarding its financial performance [1] - The company anticipates revenue of no less than 3.05 billion and net profit of at least 790 million for the first half of the year [1] Group 2: Future Business Opportunities - The upcoming launch of "Ise: Reboot Day" on September 25 in China, Japan, and South Korea, along with the overseas debut of "Xindong Town," presents potential for improved business performance [1] - The self-developed games are entering a realization phase, and the potential for market expansion is being validated [1] Group 3: TapTap Platform Performance - TapTap platform has shown robust growth, with Daily Active Users (DAU) increasing by 11% over the past 12 months, total game downloads rising by 16%, and game reservations up by 10% [1] - The operational leverage effect is expected to drive steady profit margin improvements, with anticipation for the desktop version to further expand TapTap's market space [1]

Core Viewpoint - Xindong Company (02400) has experienced a nearly 4% increase in stock price following a positive earnings forecast, indicating strong market sentiment and growth potential in the gaming sector [1] Group 1: Earnings Forecast - Xindong Company expects revenue and net profit for the first half of the year to be no less than 3.05 billion and 790 million respectively, which has exceeded market expectations [1] - The company's positive earnings announcement has surprised the market, leading to a stock price increase of 3.86% to HKD 77.95 with a trading volume of HKD 272 million [1] Group 2: Game Releases and Market Potential - The anticipated release of "Ise: Reboot Day" on September 25 in China, Japan, and South Korea, along with the overseas debut of "Xindong Town," presents opportunities for business performance improvement [1] - Huatai Securities is optimistic about the company's self-developed games entering a realization phase, validating the potential for market expansion [1] Group 3: TapTap Platform Performance - Dongwu Securities highlights that the mid-term performance forecast has surpassed both their and market expectations, with TapTap showing steady growth [1] - Over the past 12 months, TapTap's Daily Active Users (DAU) increased by 11%, total game downloads rose by 16%, and game reservations grew by 10%, indicating a steady rise in platform traffic and user engagement [1] - The company is expected to benefit from the operational leverage effect, leading to a gradual increase in profit margins, while the desktop version of TapTap is anticipated to further expand market opportunities [1]

Core Viewpoint - Xindong Company (02400) has announced a positive earnings forecast, leading to a nearly 4% increase in stock price, with expected revenue and net profit for the first half of the year to be at least 3.05 billion and 790 million respectively [1] Group 1: Earnings Forecast - The company expects revenue and net profit for the first half of the year to be at least 3.05 billion and 790 million respectively [1] - The earnings forecast has exceeded market expectations, indicating strong performance [1] Group 2: Game Releases and Market Potential - Upcoming game releases, including "Elysium: Reboot Day" on September 25 in China, Japan, and South Korea, and "Xindong Town" debuting overseas, present opportunities for business growth [1] - The company is entering a realization phase for self-developed games, with potential for market expansion being validated [1] Group 3: TapTap Platform Performance - TapTap platform has shown steady growth, with Daily Active Users (DAU) increasing by 11%, total game downloads up by 16%, and game reservations rising by 10% over the past 12 months [1] - The platform's value is expected to continue to be released, with operational leverage driving steady profit margin improvements [1] - There are expectations for the desktop version to further expand TapTap's market space [1]

Core Viewpoint - Citigroup's research report highlights that Xindong Company’s earnings surprise the market, with expected revenue and net profit for the first half of the year to be no less than RMB 3.05 billion and RMB 790 million respectively [1] Group 1 - The company is anticipated to see improved business performance in the second half of the year with the launch of "Isle: Reboot Day" and "Xindong Town" [1] - Citigroup has raised its revenue and net profit forecasts for Xindong Company for the years 2025 to 2027 [1] - The target price for Xindong Company has been increased from HKD 52 to HKD 73 [1]

Core Viewpoint - Citigroup's research report indicates that Xindong Company’s earnings surprise has positively impacted the market, with projected revenue and net profit for the first half of the year expected to be at least 30.5 billion and 7.9 billion respectively [1] Group 1 - The company anticipates an increase in business performance in the second half of the year, driven by the potential launch of "Isser: Reboot Day" on September 25 in China, Japan, and South Korea, as well as the overseas debut of "Xindong Town" [1] - Citigroup has raised its revenue forecasts for Xindong Company for the years 2025 to 2027 by 13.9%, 8.3%, and 7.5% respectively [1] - The net profit forecasts have also been increased by 79%, 42%, and 22% for the same period [1] - The target price for the company's stock has been adjusted from 52 HKD to 73 HKD [1]

Core Viewpoint - The gaming sector has experienced a significant surge, driven by strong earnings reports and favorable market conditions, indicating robust growth potential for companies in this industry [1][3][8]. Group 1: Company Performance - On August 5, gaming stocks in Hong Kong saw a collective surge, with Xindong Company experiencing a peak increase of over 26%, closing with a 24.76% rise, marking a year-to-date increase of 186.06% [3]. - Xindong Company projected a revenue of at least 3.05 billion yuan for the first half of 2025, representing a 37% year-on-year increase, and a net profit of at least 790 million yuan, reflecting a substantial growth of approximately 215% [3][5]. - The growth in Xindong Company's performance is attributed to the strong performance of self-developed games and the continuous optimization of the TapTap platform, which has led to increased revenue and profit [5]. Group 2: Industry Growth - According to the "China Game Industry Report," the actual sales revenue of China's domestic gaming market reached 168 billion yuan in the first half of 2025, a year-on-year increase of 14.08%, marking a historical high [8][9]. - The user base in the gaming sector reached 679 million, with a slight year-on-year growth of 0.72%, also a historical peak [8]. - The growth in the gaming market is supported by the successful launch of new games, the steady performance of established titles, and the strong momentum in esports and mini-program games [8]. Group 3: Policy and Market Environment - In the first seven months of the year, 884 domestic game licenses were issued, with a consistent monthly release of over 100 licenses, contributing to a stable policy environment for the gaming industry [9]. - The report indicates that the gaming industry is entering a new development phase characterized by content refinement, AI industrialization, and systematic globalization, with multiple driving factors for growth [9][10]. - Analysts expect the gaming market to maintain its growth momentum, supported by a rich game reserve and expanding profit margins [10].

Core Viewpoint - The gaming sector experienced a significant rally, particularly driven by the strong performance of Xindong Company, which saw its stock rise by 24.76% after a peak increase of nearly 40% during the trading session on August 5, 2023 [1] Company Performance - Xindong Company announced a positive earnings forecast for the first half of 2025, attributing the expected growth to the strong performance of its self-developed games, including "Ragnarok M: Initial Server," "Xindong Town," and "Torchlight: Infinite," which exceeded revenue expectations and improved gross margins [1] - Other gaming stocks also saw gains, with IGG rising by 9.79% and the overall gaming ETF increasing by 1.66% on the same day [1] Market Dynamics - The collective strength of gaming stocks is supported by multiple favorable factors, including improved performance in the gaming sector and reasonable valuations [1] - The recent ChinaJoy exhibition has acted as a catalyst for the gaming sector, suggesting that it may continue to attract market interest and present good investment opportunities [1]

Core Viewpoint - Xindong Company (02400) announced a positive earnings forecast, expecting significant revenue and profit growth for the first half of 2025, driven by strong performance from self-developed games [1] Financial Performance - The company anticipates revenue of no less than RMB 30.5 billion for the first half of 2025, representing a year-on-year increase of approximately 37% [1] - Expected net profit is projected to be no less than RMB 7.9 billion, reflecting a year-on-year increase of about 215% [1] Game Performance - The revenue growth is primarily attributed to the strong performance of self-developed games such as "Ragnarok M: Beginning," "Xindong Town," and "Torchlight: Infinite" [1] - Despite stable year-on-year average monthly active users, TapTap has seen continuous growth in revenue and profit due to improvements in advertising algorithms and increased user engagement [1] Market Reaction - Following the earnings forecast, Xindong Company's stock opened over 8% higher, with a current increase of 8.55%, trading at HKD 61.6 [1] - The trading volume reached HKD 628.443 million [1] Future Outlook - CICC noted that the company's earnings forecast exceeds both their and market expectations [1] - The company has solid profit margins from its games, with upcoming releases to watch, including "Iser" on September 25, "Xindong Town" overseas, and the core product "RO2" beta test in 2026 [1]