The company has recently updated its business situation and the progress of key products. Maintain the "buy" rating and target price of HK $3.7. The current share price corresponds to 2023E/2024E 10x/7x Pamp E, and the valuation is attractive.

Core games keep rising steadily. Recently, the company "Metro Parkour" continues to be at the top of the iOS free list, and the company increases user activity and payment rates through continuous iterations of product content.

The company plans to launch the 10th anniversary version of Metro Parkour in November, which is worth looking forward to. "Dream Home" and "Dream Garden" through the development of new levels and IP joint name, user activity and payment rates remain stable, full-year revenue is expected to achieve positive year-on-year growth.

The "Karabichu" test data are in line with expectations, and the content development is the current focus. Since the launch of the Karabichu test, data such as user activity and duration have remained stable: 20-300000 active users with a duration of 120-130 minutes. The current focus of the company is to enrich the content of the game, including the expansion of roles, methods of play and so on. The Karabichu mobile terminal is expected to be launched in the first half of next year, while the overseas PC terminal is expected to be launched next year. With the gradual improvement of new game products, the company expects cash flow to improve significantly next year.

Complete the redemption and cancellation of all 2025 convertible bonds. On October 16, the company announced that it had repurchased, redeemed and cancelled all 2025 convertible bonds, which helped to improve the company's debt ratio and optimize the company's capital structure. At the same time, the company has recently continued to carry out share buybacks to reduce equity in order to improve shareholder returns.

Maintain the "buy" rating and target price of HK $3.7. We expect the company's 2023E/2024E revenue to be RMB 2.48 billion / 2.93 billion, and the company's new tour is expected to drive future revenue growth, maintaining a "buy" rating and a target price of HK $3.70, corresponding to 2023E/2024E 14x/10x Pamp E.

The current share price corresponds to 2023E/2024E 10x/7x Pamp E, and the valuation is attractive.

Investment risk: Xinyou's performance is not as good as expected; profit improvement is not as good as expected.