The performance in the first half of 2022 was excellent: the current income in the first half of 2022 was 4.24 billion yuan, an increase of 26.3 percent over the same period last year; and the net profit of returning home was 565 million yuan, an increase of 31.2 percent over the same period last year. The operating profit was 740 million yuan, an increase of 7.7% over the same period last year. In parallel with the excellent performance in the first half of the year, the company proposes to pay an interim special dividend and an interim dividend of HK $0.5 and HK $0.4 per ordinary share respectively.
There has been a significant increase in game paying users and a steady growth in overseas markets: in the first half of 2022, the game business sector recorded revenue of 1.776 billion yuan, down 3.9% from the same period last year. Due to a 5.2% year-on-year decline in revenue from games on PC, revenue from mobile games increased by 3.1% over the same period last year. The gross profit margin of the game business continued to stabilize at 95.7%, unchanged from the same period in the first half of the year. The revenue of 22H1 classic flagship IP "Magic Domain" fell 3.8% compared with the same period last year. Mau rose 34% year-on-year, the number of active fee-paying households increased 65% year-on-year, and revenue from mobile games "Magic Domain Pocket" increased by 7.8%. The performance of the other core IP "conquest" was stable, rising 20.8 per cent year-on-year in Egypt, while revenue from other overseas markets rose significantly to 57.7 per cent. In terms of game reserves, the company launched the first Web3.0 game Neopet Yuan Universe in August 2022, and plans to continue to launch "Demon Domain Mobile Game 2" and "Neopet Sanxiao" in the second half of the year, and launch a series of new game product matrices including "Magic Domain" PC remake, "Fairy placement" and "DPS" in 2023.
Losses in the education business narrowed sharply, consolidating the industry's leading position: in the first half of 2022, the education business recorded an income of 2.41 billion yuan, an increase of 71.2% over the same period last year, and an operating classified loss of 36 million yuan, a sharp reduction of 86.08% over the same period last year; the R & D expenditure rate was 9.37%, and the sales and management rates were 10.47% and 7.35%, respectively. The company's Kmur12 interactive flat panel market share increased to 26% in the first half of 2022 compared with the previous year, and Kmuri 12 interactive flat panel display ranked first in the major market share from 2018 to 2022; interactive flat panel shipments in the first half of 2022 increased by 82.5% compared with the same period last year, an increase of 46.9%. In terms of domestic business, the company will focus on working with the Educational Technology and Resource Development Center of the Ministry of Education to develop a national intelligence education platform for primary and secondary schools for the Ministry of Education.
The company's education business is in line with the future direction of the policy environment. We believe that the interactive tablet business and domestic business will continue to develop rapidly to drive the education sector, and it is expected to improve profits and turn losses into profits in the future.
Adjust the target price to HK $25 to maintain the buy rating: based on a comprehensive analysis, we emphasize the soundness of the company's gaming business and the higher-than-expected potential of the education business. The steady development of the game IP and the continuous expansion of overseas markets as well as the smooth promotion of tablet products are expected to bring new performance growth to the company. Therefore, we maintain confidence in the future of the company. We keep the previous valuation method unchanged, and based on the 2022 earnings forecast and the adjustment of the exchange rate, the target price is HK $25, which is 73.37% higher than the previous closing price, and the buy rating is maintained.