This report is read as follows:

The lower-than-expected performance was mainly affected by policy changes. Accurate coverage strategy and high-quality customer resources tamp the company's leisure game industrialization ability.

Main points of investment:

Maintain the "overweight" rating. Taking into account the negative impact of the new policy of the "personal Information Protection Law" and Apple Inc's IDFA policy, it lowered the EPS from 2022-2024 to 2.26max 2.64max 3.03yuan (the previous value 2022-2023 is 4.24max 5.37RMB), lowered the target price to 35 yuan, and maintained the "overweight" rating.

Event: the company releases its annual report for 2021 and quarterly report for 2022. In 2021, the company's operating income increased by 16.56% year-on-year to 1.65 billion yuan, net profit from home increased by 2.95% to 310 million yuan, and net profit from non-return increased by 4.64% to 255 million yuan. The company's 2021Q1 operating income increased 4.14% year-on-year to 537 million yuan, while home net profit fell 56.72% year-on-year to 65 million yuan.

The lower-than-expected performance was mainly affected by policy changes. In 2021, Q4 revenue fell by more than 50% compared with the same period last year, with a net profit loss of 4.18 million yuan; 2022Q1, revenue increased by 4%, net profit fell by 57%, and revenue and profit declined to a certain extent compared with the same period last year, mainly due to the negative impact of the New Policy of the personal Information Protection Law and Apple Inc's IDFA policy and the pressure of the epidemic environment, and the accuracy of leisure game purchases has declined to a certain extent.

Accurate coverage strategy and high-quality customer resources tamp the company's leisure game industrialization ability. Relying on resources, technology and market advantages, the company deeply ploughs strategic key customer relations such as Baidu, Inc., XIAOMI, Byte Jump and Kuaishou Technology to build a "leisure game + advertising cash" business closed loop. In 2021, the first place for downstream advertisers in the game category was 890 million yuan, accounting for 54 percent, an increase of 33 percent over the same period last year; the second place was 270 million yuan in the e-commerce category, accounting for 16 percent, an increase of 26 percent over the same period last year.

Risk tips: the expansion of Internet advertising is not as expected, and the development and operation of new products is not as expected.