Main opinion: The company started with mobile games, and successfully achieved “end to hand” in 2019. The company was founded in 2008 in the mobile game era, so it initially started with mobile game research and development, and launched the first mobile game “Dream Three Kingdoms” in 2009. Under the company's long-term operation, it still belongs to the three major Internet cafe MOBA games along with “League of Legends” and “Dota 2,” and the flow rate has remained stable. In 2019, the company successfully transitioned to mobile through the “Three Kingdoms of Dreams” and the acquisition and development of a simulated mobile game company, Youdong Network. Mobile game revenue also reached 40% in 2019, driving the company's H1 net profit to increase by 75.4% and 146.2% respectively in 2019 and 2020. The mobile game industry remains prosperous, and the value of high-quality developers has been further highlighted since 2015. The increase in ARPU value driven by the intensification and refinement of mobile games is the main logic of industry growth. Furthermore, the development of superimposed cloud games is expected to open up the industry ceiling. We expect the mobile game industry to continue to maintain a double-digit growth rate in the future, and the industry's prosperity will remain the same. In the industrial chain, with the rise of content-based channels such as TapTap, Douyin, and Bilibili, downstream channels are gradually fragmented, and the value of high-quality developers will be further highlighted. At the same time, as the market shares of Tencent and NetEase have gradually stabilized at around 75%, there is limited room for further improvement. Therefore, in the future, I am optimistic that high-quality small and medium-sized developers will expand their breakthroughs through various categories, such as competitive competition, two-dimensional female orientation, national style, etc. Looking at the company's product line in the short term, many blockbuster mobile games were launched in 2020-2021. We believe that 2019 was the first year of the company's transformation from mobile games to mobile games, and the launch of the company's many blockbuster mobile game titles in the second half of 2020 and 2021 is expected to drive further rapid growth in performance. Major products in 2020: “X2 Demon Demon,” which will be launched at the end of October, is a two-dimensional ARPG mobile game. The game has become TapTap's top 20 most popular two-dimensional mobile game before it goes live; “My Knight”, which was launched in November, is an open world, retro martial arts strategy RPG mobile game, personally operated by Yu Xiaoliang, the company's co-founder and well-known game producer, and has signed up for Aurora as an exclusive agent for Tencent. Main products in 2021: “DC: Pinnacle Battleground” is a MOBA-type mobile game developed by DC under the licensing company of its major superheroes; the sequel to “Battle of the Barbarians 2” inherits the excellent standards of previous games, and is expected to shift from high reputation to high returns. Looking at the medium to long term, the company's excellent R&D strength and deep-rooted innovation genes Although the company's short-term performance mainly depends on the product line, as an R&D-driven company, the medium to long-term core competitiveness is reflected in the company's genes, culture, and mechanism. We believe that the future growth of the company is mainly driven by three aspects: 1) R & D: the company's R&D capabilities have been recognized by the market many times, and excellent game production talents are the cornerstone of the company's R&D drive. The company currently has many producers with rich industry experience. Among them, Yu Xiaoliang, the core producer, was once known as one of the top ten gold medal game planners in China; 2) Innovation is driven by innovation at the beginning of the company. This innovation is reflected in the company's various games. Taking “My Knight” as an example, it is a rare domestic open world martial arts game. Gameplay and categories are all domestic Pioneering; 3) Extension-driven: Connecting high-quality external developers through E-Soul Venture Capital as an investment platform to further enrich the company's product matrix; at the same time, actively expanding game-related industries, including game streaming and e-sports. Investment advice: We believe that with the mobile game industry still maintaining rapid growth in the future and the value of developers being further highlighted, the company is expected to continue to create differentiated high-quality mobile game works with its excellent R&D strength and innovation genes, thus driving continuous growth in future performance. We expect the company's revenue in 2020-2022 to be 1,047/14.75/1,883 billion yuan, an increase of 50.2%/40.9%/22.2% over the previous year, and net profit of 4.01/5.62/694 billion yuan, respectively, an increase of 75.7%/40.2%/23.6% year on year. EPS is 1.64/2.30/2.84, and corresponding PE is 25.1X/17.9X/14.5X, respectively. First coverage, giving a “buy” rating. Risk warning: 1) the risk that the growth rate of the mobile game industry will slow down; 2) the risk that cloud gaming development will fall short of expectations; 3) the risk that the company's newly launched games will fall short of market expectations.