Investment Rating - The investment rating for the company is "Buy" (maintained) [1] Core Views - The company has demonstrated excellent profit performance with a rich reserve of new games [1] - For the first three quarters of 2025, the company achieved revenue of 12.46 billion yuan, a year-over-year decrease of 6.59%, and a net profit attributable to shareholders of 2.34 billion yuan, a year-over-year increase of 23.57% [4] - The company continues its dividend strategy, proposing a cash dividend of 2.10 yuan per 10 shares (including tax) [4] Financial Performance - In Q3 2025, the company reported revenue of 3.97 billion yuan, a year-over-year decrease of 3.23%, and a net profit of 940 million yuan, a year-over-year increase of 49.24% [4] - The company’s sales expenses for the first three quarters of 2025 were 6.2 billion yuan, a year-over-year decrease of 19.5% [5] New Game Performance - New games such as "Time Explosion" and "Heroes Don't Flash" have performed exceptionally well, with "Heroes Don't Flash" reaching the top of the WeChat mini-game sales chart [5] - The new game "Douluo Dalu: Hunting Soul World" launched in July 2025, topping the iOS free chart on its public test day, with a cumulative download of 1.51 million and estimated revenue of 12 million yuan within 8 days [5] Game Portfolio and AI Integration - The company has a diverse portfolio of new games across various genres, including MMORPG, SLG, and card games, with titles like "The Son-in-Law" and "Code MLK" [6] - The company has deepened its AI integration, utilizing its self-developed industry model "Xiao Qi" across multiple business areas, with over 80% of 3D art resources generated by AI [7] Profit Forecast - The company is expected to achieve net profits attributable to shareholders of 3.05 billion yuan, 3.30 billion yuan, and 3.57 billion yuan for the years 2025, 2026, and 2027, respectively [8] - The corresponding price-to-earnings ratios for these years are projected to be 15.06, 13.90, and 12.87 times [8]

Group 1 - The company reported a 10.72% year-on-year increase in net profit for the first half of 2025, reaching 1.4 billion yuan, despite an 8.08% decline in revenue to 8.486 billion yuan [1] - In Q2 2025, the company achieved a net profit of 851 million yuan, marking a significant 31.24% year-on-year increase and a 54.97% quarter-on-quarter increase, while revenue was 4.243 billion yuan, down 5.33% year-on-year [1] - The company plans to distribute a cash dividend of 2.10 yuan per 10 shares, totaling 465 million yuan, which represents 33.18% of the net profit for H1 2025 [1] Group 2 - The company is leveraging multi-IP collaborations to extend the lifecycle of existing games, with titles like "Seeking the Great Thousand" and "Time Grocery Store" showing effective engagement strategies [2] - New game releases such as "Time Explosion" and "Heroes Have No Flash" have quickly climbed to the top of the iOS and WeChat mini-game charts, indicating strong market reception [2] - The company has a diverse product line, with ongoing development in various genres including MMORPG, SLG, and card games, and has secured rights for multiple popular IP adaptations [3] Group 3 - The company is expected to see revenue growth from 17.589 billion yuan in 2025 to 18.765 billion yuan in 2027, with net profit projected to increase from 2.917 billion yuan to 3.208 billion yuan during the same period [3] - The company's current valuation does not fully reflect its earnings recovery potential and long-term growth prospects, suggesting room for revaluation [3] - The company is rated as a "buy" based on its performance and growth outlook [3]

Core Viewpoint - The company reported a decline in revenue for the first half of 2025, but an increase in net profit, indicating a strong performance in profit management despite revenue challenges [1][2]. Group 1: Financial Performance - In H1 2025, the company achieved operating revenue of 8.486 billion, a year-on-year decrease of 8.08%, while net profit attributable to shareholders was 1.4 billion, an increase of 10.72% [1]. - For Q2 2025, the company reported operating revenue of 4.243 billion, a year-on-year decrease of 5.33%, but net profit attributable to shareholders rose to 0.851 billion, an increase of 31.24% [1]. - The company's sales expenses in H1 2025 were 4.410 billion, down 17.73% year-on-year, with a sales expense ratio of 52.0%, a decrease of 6.1 percentage points [2]. Group 2: New Game Launches - The company launched several new games in H1 2025, including "Time Explosion" and "Heroes Without Flash," with "Time Explosion" reaching the top of the App Store free chart in January [1]. - The revenue recognition for new games has a lag, which contributed to the slight decline in H1 revenue, but the company has a strong pipeline of upcoming titles [1]. Group 3: Cost Management and Efficiency - The reduction in sales expenses has effectively offset revenue fluctuations, leading to significant profit growth in H1 2025 [2]. - AI has played a crucial role in cost reduction and efficiency improvement, with over 70% of game advertisement materials generated by AI and 50% of total ad placements being AI-driven, enhancing ad efficiency by 70% [2]. Group 4: Investment Outlook - The company is expected to continue its stable performance with new game launches contributing to revenue growth, projecting net profits of 2.944 billion, 3.125 billion, and 3.401 billion for 2025-2027, with corresponding PE ratios of 15x, 14x, and 13x [2].