Event: The company released its 2020 mid-year report. 2020H1 achieved revenue of 926 million yuan, up 33.0% year on year; net profit of 443 million yuan, up 110.1% year on year; net profit after deduction of 269 million yuan, up 10.1% year on year. Non-recurring profit and loss was mainly income from investment in technology and Betta. Q2 achieved revenue of 517 million yuan in a single quarter, up 51.9% year on year and 26.4% month on month; net profit after deducting non-return net profit of 180 million yuan, up 93.4% year on year and 102.2% month on month. The mobile game business has a high growth rate and high gross profit, and R&D capabilities in core categories have been verified. 20H1's mobile game business achieved revenue of 878 million yuan, up 33.7% year on year; gross profit margin was 74.7%, up 17.4 pct year on year. The company's sales expense ratio was 20.0%, an increase of 18.0pct over the previous year, mainly due to the adjustment of promotion expenses from costs to sales expenses. “One Punch Man: The Strongest Man”, “King of Fighters 98: Ultimate Battle OL”, “Miracle MU: Awakening”, “Miracle MU: Awakening”, “National Miracle”, and “Heroes of Might and Magic” each ranked in the top five game revenue, accounting for 38.8%/19.2%/15.3%/3.8%/3.5%, respectively. Among them, the card mobile game “One Punch Man: The Strongest Man” had outstanding performance in domestic and international markets. 20H1 achieved revenue of 358 million yuan, of which overseas revenue was 267 million yuan, ranking at the top of the rankings in Hong Kong, Macao, Taiwan, and Southeast Asia. The company's card-based mobile game development capabilities were verified. The classic mobile games “King of Fighter 98OL” and “Miracle MU: Awakening” continued to contribute to stable flow, achieving revenue of 177/141 million yuan in 20H1. Increase purchasing volume and distribution, and the continuous promotion of new products is optimistic about the medium-term development trend. The company has strengthened the construction of a purchasing volume distribution network. “True Red Blade”, which was launched on August 5, independently carried out volume distribution. It was recommended by a superstar product from the Hardcore League. On the first day of launch, it ranked 10th in the iOS free list, and remained within 50 in the bestseller list for two weeks after launch. The new tours “National Miracle 2” and “Street Fighter: Showdown” are expected to be gradually released in 2020H2, contributing to performance elasticity. “National Miracle 2,” a sequel to the Miracle IP series, draws on Unreal Engine and is expected to continue the outstanding performance of the previous game; “Street Fighter: Showdown”, as an arcade fighting+comic IP game that will soon be launched, is expected to start again using the mature R&D and operation path of the previous hit game “King of Fighters 98OL”. Publish employee stock ownership plans to stimulate employee vitality and boost confidence in long-term development. In 2019-2020, the company's repurchases for two consecutive years were used for employee stock ownership plans or equity incentives, demonstrating confidence in the company's future development and the importance attached to new employees. On August 17, 2020, the company announced the second phase of the employee stock ownership plan (draft) to incentivize no more than 122 employees and transfer the company's share repurchase to employees at a price of 3.8 yuan/share. A wide range of employee stock ownership plans is expected to continue to stimulate employee enthusiasm and help the company's long-term stable development. Investment suggestions: The company has deep R&D capabilities in the field of miracle MMOs and card mobile games, and at the same time invigorates purchasing volume distribution to improve the business layout. New products will be gradually released in 2020-2021. It is estimated that the net profit of the mother in 2020-2022 will be 6.5/10.1/130 billion yuan, maintaining the “buy” rating. Risk warning: policy regulation risk; product performance falls short of expectations; risk of increased industry competition.