Company News The company announced its 2020 semi-annual report. During the reporting period, it achieved revenue of 926 million yuan, an increase of 33.04% over the previous year, and realized net profit of 443 million yuan, an increase of 110.11% over the previous year. On the revenue side, the revenue side of the game was driven by overseas revenue, and the profit side was driven by income from changes in fair value. In the first half of the year, the company's game business achieved revenue of 878 million yuan, an increase of 33.68% over the previous year. The revenue increase was mainly due to the outstanding overseas sales performance of the mobile game “One Punch Man”. In the first half of the year, “One Punch Man” achieved a total revenue of 358 million yuan at home and abroad, accounting for 39% of the company's game revenue, of which 267 million yuan was overseas revenue, which was the main source of the company's revenue growth in the first half of the year. Since “One Punch Man” landed in Hong Kong and Taiwan in January of this year, it has been at the top of the iOS bestseller list many times, with outstanding performance; in June, “One Punch Man” also performed well after being launched in Southeast Asia. On the profit side, the company adjusted game promotion expenses from the cost side to sales expenses. The company's gross margin after deduction of sales expenses in the first half of the year was 55.43%, down 1.35 percentage points from the same period last year. Considering the high promotion expenses at the beginning of the launch of “One Punch Man,” the changes were in line with expectations. In the first half of the year, the company confirmed income from changes in the fair value of non-current financial assets of 217 million yuan. Excluding the impact of non-recurring profit and loss items, the company achieved net profit of 269 million yuan after deducting non-recurring profit and loss, an increase of 10.08% over the previous year. A number of new products are poised for development, and future performance is promising. In August, the company launched a new game developed and developed on its own in China, “True Red Blade”. The game was endorsed by Shen Teng and entered the iOS Top 25 bestseller list at the beginning of its launch. Currently, the game's best-selling ranking has declined, and the ranking has gradually stabilized in the 50-80 range, which will contribute positively to the company's performance in the second half of the year. The company currently has three key games, “National Miracle 2,” “Dark Tide,” and “Street Fighter: Showdown,” all of which have obtained version numbers. Among them, “National Miracle 2” and “Street Fighter: Showdown” will be distributed by Tencent. “National Miracle 2” is the latest mobile game in the company's “Miracle” IP series, and it is also the first product in this series of products developed using the Unreal 4 engine. The game's graphic performance is expected to make some progress compared to the company's previous MMORPG games; “Street Fighter: Showdown” uses the company's favorite action card gameplay, and introduced a QTE system to improve Players' operating space. The game has now entered the paid testing stage. In the future, new games will be launched one after another, which will bring sufficient performance flexibility to the company. The profit forecasting and valuation company has accumulated rich R&D experience in the fields of MMORPG and card games. While maintaining deep cooperation with Tencent for a long time, it also has the ability to distribute independently. As many new games are launched one after another in the future, the company's performance is expected to grow rapidly. Net profit attributable to shareholders of the parent company in 2020-2022 is estimated to be 650 million yuan, 842 million yuan and 1,085 million yuan respectively, EPS is 0.24 yuan, 0.31 yuan and 0.39 yuan respectively, and corresponding PE is 36.98, 28.56 and 22.17 times higher. For the next 6 months, maintain the “prudent increase in holdings” rating. Risk suggests increased competition in the industry; new game performance falls short of expectations; new games launch later than expected; policy risk; risk of impairment of goodwill