Incidents: In the first half of 2020, the company achieved revenue of 926 million yuan, a year-on-year increase of 33.04%, net profit of 443 million yuan, an increase of 110.11% over the previous year. The performance in the first half of the year exceeded market expectations, mainly due to the excellent performance of the self-developed game “One Punch Man: The Strongest Man” in overseas markets such as Hong Kong, Macao and Taiwan, and large changes in fair value of investments such as Betta and Palm Reading. The deduction was 269 million yuan, up 10.08% year on year. After the split, 20Q2 achieved revenue of 517 million yuan, a year-on-year increase of 51.93%, a 26% increase of 26%, net profit of 349 million yuan, a year-on-year increase of 180 million yuan, a year-on-year increase of 180 million yuan, a year-on-year increase of 93.40%, a year-on-year increase of 102%. Looking at the endogenous growth in the second quarter alone, “One Punch Man: The Strongest Man” showed revenue growth in the first quarter after overseas launch. The second quarter's revenue and net profit both increased, showing the company's excellent game quality and overseas distribution capabilities. The company's 20H1 gross profit margin was 75.42%, and the 20Q2 gross profit margin was 75.86%. The company's 20H1 net profit margin was 47.66%, and the 20Q2 net profit margin was 67.36%, an increase of 60.48pct over the previous year, mainly due to impressive game performance. The company's 20H1 four expenses were 398 million yuan, up 94.15% year on year, mainly due to a sharp increase in sales expenses: 20H1 sales expenses of 185 million yuan, a sales expense ratio of 19.99%, an increase of 17.95 pct over the previous year, mainly due to the company's implementation of the new revenue guidelines to adjust promotion expenses from main business costs to sales expense accounting; 20H1 management expenses of 42.4479 million yuan, management expenses of 4.58%; 20H1 R&D expenses of 183 million yuan, R&D expenses of 19.72%; 20H1 financial expenses- 11.718,700 yuan, financial expense ratio -1.27%. According to the split, 20Q2 sales expenses are 63 million yuan, and the sales expense ratio is 12.17%; 20Q2 management expenses are 22 million yuan, the management expense rate is 4.29%; 20Q2 R&D expenses are 96 million yuan, and the R&D cost rate is 18.58%; 20Q2 financial expenses are 0.3 billion yuan, and the financial expense ratio is -0.55%. The overall cash flow situation is healthy. The net cash flow from operating activities in 20H1 was 232 million yuan, up 69.14% year on year, mainly due to the increase in operating income, which led to an increase in net operating cash flow in 20Q2. Continued incentives, full motivation, and improved equity structure. On August 17, the company disclosed the second phase of the employee stock ownership plan, and granted the company's first repurchased shares since '19 to the company's directors, supervisors, etc., for a total of 278.628.43 million shares (1.0104%). The transfer price was 3.80 yuan/share. Among them, Chairman and General Manager Liu Huicheng accounted for 36.7545% of the current employee shareholding plan. In addition, the company announced a second repurchase of 1 to 200 million yuan on June 1. Currently, the repurchase price does not exceed RMB 8.61 yuan/share (inclusive). It will continue to be used for employee incentives. As of July 31, it has repurchased 105 million yuan. Investment advice: In the first half of the year, Q2 performance in particular exceeded market expectations. Whether it was the performance of the endogenous “One Punch Man” or the non-uniform performance of investing in Betta, etc., was impressive. Our August gold stock and August 18 “The Disclosure of the Second Phase Employee Stock Ownership Plan of Palm Fun Technology, Demonstrating Long-term Confidence” emphasized optimism about the company's earnings and consolidated its annual performance. Considering that the company has mainly contributed to blockbuster titles launched since the second half of '20, including 3 exclusive Tencent titles with existing editions, we maintain our early profit forecast for the time being until the blockbuster games are launched. We expect the company's net profit for the period 20-21 to be 6.42/1,151 billion yuan respectively, corresponding to the current valuation of 36/20x, maintaining a “buy” rating, and maintaining a “buy” rating. August gold stocks are strongly recommended. Risk warning: risk of industry regulatory policy; risk of increased market competition; risk of new game development and operation; risk of loss of core personnel; risk of impairment of goodwill