“Heartfelt Town” pre-download ranked No. 1 in the iOS free download list. It focuses on user growth and maintains a “buy” rating

On July 17, the company launched the public beta of the self-developed life simulation mobile game “Heart Dynamic Town”. On July 15, the number of reservations for “Heartbeat Town” on all platforms exceeded 3 million, July 16. “Heartbeat Town” is open beta pre-download, ranking #1 on the App Store free list and #1 on the TapTap Hot List. As of July 17, “Heartbeat Town” had over 0.8 million downloads on the TapTap platform, with a rating of 8.8. We believe that as a slow-paced life simulation game, the gameplay and payment logic of “Heartbeat Town” is biased towards high DAU and low ARPU values. It attracts users through game quality and word-of-mouth communication in the early stages, retains users with rich content and strong social interaction, and then guides users to pay through relatively inexpensive skins, costumes, etc., thereby contributing to a steady flow of revenue to the game. Therefore, “Heartbeat Town” may experience a climbing period in the early stages of its launch. As the number of active users increases, the volume of traffic is also expected to continue to rise. Furthermore, “Heartbeat Town” audience users are biased towards female players and casual players, which is different from the current core users of TapTap, which is expected to drive TapTap to further break the circle and drive user growth. We maintain our profit forecast for 2024-2026. We expect the company's net profit for 2024-2026 to be 0.783/1.137/1.246 billion yuan, corresponding EPS of 1.6/2.4/2.6 yuan respectively, and the current stock price corresponding to PE is 9.3/6.4/5.8 times, respectively. We are optimistic that new games and TapTap will drive the company's performance growth and maintain a “buy” rating.

The WeChat mini-game version of “Let's Go Muffin” was launched on July 17. It is expected to further improve the game's distribution “Let's Go Muffin” National Service and remained in the top 25 iOS bestsellers until July 17, with over 3 million downloads across all platforms. On July 17, the WeChat mini game version of “Let's Go Muffin” was launched. The “Let's Go Muffin” is highly compatible with the mini game platform, and “Let's Go Muffin” is distributed exclusively by TapTap and has not been launched on other Android channels. The mini game version is expected to reach more Android users and non-core players, further improving the overall flow of the game. Furthermore, the “Let's Go Muffin” follow-up performance in Japan and Hanbok is also worth looking forward to.

TapTap may continue to benefit from increased launch demand brought about by the launch of a large number of new games, and the abundance of new products in the 2024 game market, including Tencent's “DNF Mobile Game”, “Breaking the Stars”, NetEase's “Eternity”, Miha Tour's “Desperate Zone Zero”, etc., and the launch of a large number of new games may lead to an increase in overall marketing demand, and the TapTap platform is expected to continue to benefit from increased marketing demand. At the same time, impressive game performance within the platform is also expected to drive the growth of platform users.

Risk warning: New game launch performance falls short of expectations, TapTap's revenue growth falls short of expectations, etc.