Measures such as voluntary sales bans and company repurchases by controlling shareholders demonstrate the company's confidence, maintain the “buy” rating company and issue announcements. They intend to repurchase no more than HK$70 million of shares on the open market, and the number of shares to be repurchased is no more than 54.3 million shares. Earlier, the company issued an announcement on August 17 that the controlling shareholder voluntarily banned the sale of shares for 6 months.

We believe that the company's controlling shareholders voluntarily banning the sale of shares and the company's repurchases reflect the company's confidence in long-term performance growth. We maintain a profit forecast for 2023-2025. We expect the company's net profit from 2023-2025 to be 316/4.13/512 million yuan, corresponding to EPS of 0.2/0.2/0.3 yuan, respectively, and the current stock price corresponding to PE 9.5/7.2/5.8 times, respectively. We are optimistic that the increase in the penetration rate of AR/VR scenarios and the growth in demand for 3D content will drive the company's long-term growth and maintain the “buy” rating.

The To B side business is growing steadily, and the To C side is boosting digital human content operations, opening up new growth space on the To B side. AR/VR marketing business is growing steadily, AR/VR content business continues to expand, recently collaborated with the VR Sanxingdui Experience Exhibition, and signed a strategic cooperation with Capital Airport Group Media Co., Ltd. On the To C side, the company invests in content management, and the incubated digital human account “Li Haoyu” gained nearly 3 million followers on the Kuaishou platform in 3 months. In the future, it plans to launch a number of million-level digital human accounts with millions of fans to form a digital people matrix. Commercialization monetization through live streaming rewards, delivery, and business orders is expected to become a new performance growth point for the company.

A live-action interactive video game was laid out earlier, and the XR version of the live-action interactive video game may have greater market potential. According to SteamSpy data, the live-action interactive video game “Done! I'm surrounded by beautiful women!” Twenty days after launch, it sold 800,000 copies on the Steam platform, and the game achieved great commercial success. As early as 2017, the company made its own and launched the interactive drama games “When Love Goes On I” & “When Love Goes On II”. It has accumulated a large amount of content shooting and production and subsequent gamification development capabilities and experience, and has an advantage in the development of live-action interactive video and video games. Furthermore, according to a report by the Financial Association on November 10, Meta and Tencent have reached a preliminary agreement. Tencent will begin selling Meta's low-cost VR headsets at the end of 2024. Also, Apple's MR terminal VisionPro will go on sale in 2024. As the performance of XR terminal devices continues to be optimized and the penetration rate of C-end users increases, game XR may become an important trend. At the same time, there are many potential integration points in fields such as interactive video games, AI, and XR. XR interactive video games can greatly enhance the user's immersive experience, further enhance user engagement and game stickiness, and drive user payments to increase, thus creating a new broad market space.

Risk warning: C-side business development falls short of expectations, demand for VR content falls short of expectations, etc.