Incident: The company's much-talked-about new game “Demon Slayer: X2” started the file deletion billing test from 10:00 on July 29 to 16:00 on August 5. As of 2020/8/5, the number of reservations on the TapTap channel exceeded 78W. The test was highly topical about the game's story. The official government has officially stated that it will be revised before it is officially launched, and the Bilibili platform will be broadcast live to apologize, promising to revise the story content and popularity system, and distribute benefits after the test kit and launch. The number of viewers of the live broadcast exceeded 90W. As of 2020/8/5 at 10:00 a.m., the TapTap platform's “Demon Slayer: X2” is currently rated 7.2. Comment: 1. “Demon Slayer: X2” is a SIVA studio project owned by the company. It has now entered the file deletion payment test stage. As the company's first two-dimensional game, it has received a high level of market attention for its excellent art quality and innovative gameplay. The core competitiveness of two-dimensional games lies in the playwright setting, art style, and core gameplay (combat experience). “Demon Slayer: X2” has certain highlights in these three aspects. “God Demon: X2” has a grand plot and a certain level of originality and depth. The characters are rich and three-dimensional, the art style is clear, and the characters are depicted in detail. The battle uses Rougelite as the core innovation point, adds a sense of randomness to enrich gameplay, improve the playability of the game, and the overall quality is high. Players are generally concerned about the plot and character relationships. Officials have promised that the official launch version will be revised to maintain the game's reputation. 2. The growth rate of the two-dimensional game category market is impressive. At the same time, compared with games of the same category and style, “Demon Slayer: X2” itself has a certain degree of innovation and has a unique competitive advantage. 2020Q1, the performance of two-dimensional games in China is excellent, with a market size of 7.620 billion yuan, an increase of 40.59% over the previous year, with great potential for growth. Currently, Rougelite's competitors in the market are mainly European and American painting styles, and there are relatively few Japanese-style products. In this regard, “Demon Slayer: X2” has a certain first-mover advantage. Furthermore, with regard to the market performance of the two games “Battle Double Pamish” and “The Eternal City of Seven Days,” which have a certain degree of similarity in title material, audience, combat gameplay, and art style, we believe that “Demon Demon: X2”, as a two-dimensional product currently receiving a high level of attention, will inject new vitality into the game market after it is officially launched. 3. Profit forecast and investment rating: The company started with mobile games, focused on quality R&D, and expanded to mobile games, VR games, etc. Many co-founders are from Tencent, and are still highly invested in the frontline of the business. Since 2019, performance has returned to a growth trajectory. 2020 is a major product year, and featured new products such as “My Knight,” “Demon Slayer: X2,” “Genesis Is Out of Control,” and “DC: Pinnacle Battlefield” are about to be launched. Combined with the continued popularity of two-dimensional games, the company is expected to usher in a new breakthrough in the mobile game field. We expect net profit of RMB 4.14/509/588 million yuan in 2020-2022, corresponding to current PE of 30/24/21X, respectively, maintaining the “recommended” rating. Risk warning: game industry policy risks, increased level of competition, new product launch progress and market performance falling short of expectations, loss of core talent, changes in player preferences, changes in new technology changes that fall short of expectations, risks of corporate governance/asset impairment/lifting of the ban on holdings, changes in market style, etc.