“Heartbeat Town” has seen impressive user growth, and is expected to achieve long-term operation. Since its launch on July 17, the slow paced life simulation game “Heartbeat Town” has remained in the top 3 of the AppStore free list. According to Qimai data, the number of downloads on the Apple side has exceeded 3 million. As of August 8, the number of downloads on TapTap has exceeded 21 million, and the number of new users is impressive. It has great potential for DAU products. At the same time, “Heartbeat Town” has a high reputation, maintaining a high score of 8.7 on the TapTap platform, and there are many positive reviews from users.

On the Douyin platform, with #心动小镇话题视频播放量超3 .2 billion followers, the official Xindong Town account has more than 1.5 million followers. Relying on the high quality of the game and social fission, “Heartbeat Town” is expected to continue to break the circle, maintain continuous growth in the number of users, and open up room for game monetization. Subsequent long-term operations are expected to contribute stable turnover to the company over a long period of time. At the same time, new users are mainly organic traffic, compared to games that rely on purchasing volume or achieve higher profit margins. 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, and the current stock price corresponding PE is 12.9/8.9/8.1 times, respectively. We are optimistic that new games such as “Let's Go Muffin” and “Heartbeat Town” and TapTap will drive the company's performance growth and maintain the “buy” rating.

“Heartbeat Town” will launch its first trend season event on August 10, or drive game traffic to increase. On August 10, “Heartbeat Town” will launch the first trend season event “Beach Park”. The in-game chamber of commerce will launch trendy gift boxes. Players who buy trendy gift boxes can gradually unlock prizes such as trendy season little yellow duck sets, exclusive furniture, building materials, tool skins, etc., and unlock a new hobby — sand carving. Additionally, paid vehicles such as single-player bikes and tandem bikes will be released in the game on August 10th. We believe that the early payment design of “Heartbeat Town” is quite restrained. As operational activities continue to improve the user experience and launch new paid content, it will help increase user retention and drive user payment demand, and the launch of the new campaign is expected to drive the “Heartbeat Town” sales volume to rise rapidly.

“Heart Touch Town” has driven the growth of TapTap users, further opening up the platform's monetization space. The rapid growth of “Heart Town” users has also led to an increase in the number of TapTap downloads. TapTap continues to rise in the overall ranking of the App Store free list, reaching a record high of 11. At the same time, most of the new users added to “Heartbeat Town” are female players and casual players, which is different from the current core users of TapTap, or further expand the platform's user base, increase the monthly activity scale of the platform, and further open up space for monetization in advertising and other businesses.

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