Investment Rating - The investment rating for the company is "Buy" and is maintained [7] Core Views - The company achieved revenue of 4.243 billion yuan in Q2 2025, a year-on-year decrease of 5.33%, while the net profit attributable to shareholders was 851 million yuan, an increase of 31.24% year-on-year [2][4] - The company has a rich product and IP reserve, with several new games expected to launch in early 2025, contributing to stable performance in Q2 [2][12] - The company’s overseas revenue for H1 2025 was 2.724 billion yuan, accounting for 32.1% of total revenue, despite a year-on-year decrease of 6.0% [12] Summary by Sections Financial Performance - In H1 2025, the company reported total revenue of 8.486 billion yuan, a year-on-year decrease of 8.08%, and a net profit of 1.4 billion yuan, an increase of 10.72% year-on-year [4] - Q2 2025 saw a net profit of 851 million yuan, with a net profit margin of 20.1% [12] Product Development - The company has multiple new games set to launch, including "Time Explosion" and "Heroes Don't Flash," which are expected to perform well in the market [12] - The company’s self-developed MMO "Douluo Dalu: Hunting World" began public testing in July 2025, with plans for gradual revenue contribution [12] Cost Management - Q2 2025 saw a reduction in sales expenses to 1.992 billion yuan, a decrease of 4.8% year-on-year, leading to a sales expense ratio of 46.9%, the lowest since 2022 [12] - The gross profit margin slightly decreased to 76.1% due to an increase in agency product proportion, but the net profit margin improved significantly [12] Shareholder Returns - The company plans to distribute a cash dividend of 2.1 yuan for every 10 shares, maintaining a high dividend payout ratio of approximately 66% of net profit for H1 2025 [12]

Investment Rating - The report maintains a "Buy" rating for the company [5][7]. Core Insights - The company achieved a revenue of 8.486 billion yuan in H1 2025, a year-on-year decline of 8.08%, while the net profit attributable to shareholders reached 1.4 billion yuan, an increase of 10.72% [1]. - New game releases such as "Time Explosion" and "Heroes No Flash" have performed exceptionally well, with "Time Explosion" reaching the top of the iOS free chart and later ranking fourth in the WeChat mini-game sales chart [2]. - The company continues to strengthen its long-term operational capabilities for existing games and has seen stable performance from overseas products, with overseas revenue at 2.724 billion yuan, a year-on-year decline of 6.01% but an increase in its share of total revenue [3]. - The company has upgraded its AI model capabilities, with over 80% of 2D art assets generated using AI technology, and more than 70% of game advertisement videos produced with AI involvement [4]. Financial Overview - The company is projected to achieve revenues of 18.418 billion yuan, 19.523 billion yuan, and 20.889 billion yuan for the years 2025, 2026, and 2027, respectively, with year-on-year growth rates of 5.6%, 6.0%, and 7.0% [5][6]. - The net profit attributable to shareholders is expected to be 2.808 billion yuan, 3.030 billion yuan, and 3.288 billion yuan for the same years, with growth rates of 5.1%, 7.9%, and 8.5% [5][6]. - The company's P/E ratios are projected to be 14, 13, and 12 for the years 2025, 2026, and 2027, respectively [5].