1. Overview of the incident Electric Soul Network released a draft incentive plan on October 11, which plans to grant 4.267 million restricted shares to incentive recipients. It accounted for approximately 1.75% of the company's total share capital of 244,026 million shares at the time of the announcement of the draft incentive plan. Of these, 4.147 million shares were granted for the first time; 120 million shares were reserved. The initial grant price for some restricted shares is 20.57 yuan per share. After the grant conditions are met, the incentive target can purchase additional restricted company shares issued by the company to the incentive target at a price of 20.57 yuan per share. At the same time, the company's key new games “Demon Slayer” and “My Knight” have been scheduled for October 22 and November respectively, and the company's mobile game business is expected to break through further. 2. Analysis and judgment incentives target the company's business team, and the three-round lifting period drives employees to create long-term value: this incentive targets middle management and core technology (business) backbone, for a total of 194 people. Independent directors, supervisors, and shareholders or actual controllers who alone or collectively hold 5% or more of the company's shares, and their spouses, parents, and children are not included. The aim is to attract and retain outstanding talents, fully mobilize the enthusiasm of the company's employees, and effectively combine shareholders' interests, company interests and the individual interests of the core team. The ban on restricted stocks covered by the incentive plan is expected to be lifted in three rounds. In the first round, sales restrictions of 30% were lifted from the first trading day 12 months after completion of registration of restricted stocks on the last trading day within 24 months; in the second round, sales restrictions of 30% were lifted from the first trading day 24 months later to the last trading day within 36 months; and in the third round, sales restrictions were lifted by 40% from the first trading day 36 months later to the last trading day within 48 months. A performance assessment must be completed before each round of sales restrictions is lifted. Among them, in the first restricted stock granted for the first time, the growth rate of net profit in 2020 should not be less than 10% compared to 2019 during the first lifting period; in the second period where the restrictions were lifted, the growth rate of net profit in 2021 compared to 2019 should not be less than 20%; and in the third period where restrictions were lifted, the growth rate of net profit in 2022 should not be less than 30% compared to 2019. Meanwhile, the three rounds of performance assessments reserved for restricted stocks rose to no less than 20%; 30% and 40%, respectively. “God Solver” is about to go live, and “My Knight” is scheduled to go live in November: the key two-dimensional mobile game “God Demon” has been revised in response to players' suggestions and is scheduled to be launched on October 22. At the same time, the number of reservations for the game on all platforms has already exceeded 3 million. Another key retro martial arts mobile game, “My Knight,” is scheduled to be launched in November. Currently, the official website has over 1 million reservations, and TAPTAP has 440,000+ reservations. Players of both games have a high level of attention and are optimistic about the company's new game launch performance. 3. Investment recommendations We still maintain the company's performance forecast for 2020-2022 with net profit of 450 million yuan, 70 million yuan, and 9.1 billion yuan. The PE corresponding to the company's current stock price is 23X, 14X, and 11X respectively, which is relatively cost-effective. In the short to medium term, we are optimistic about the recovery of the company's main product, “Dream Three Kingdoms”, and the long-term operation of mobile games to stabilize the basic performance market. After 20 years of product years, new games such as “My Knight” and “X2” continued to increase profits after the launch of new games such as “My Knight” and “X2,” the long-term optimism of the company's deep cooperation with other major companies such as Tencent to improve the distribution side and strategically deploy VR business ahead of schedule. At the same time, the company's cash flow quality is good. The company's management is highly focused on the product and maintained a “recommended” rating. 4. Risk warning: New games are not launched as scheduled, game flow falls short of expectations, and the risk of game policy regulation at home and abroad.