24Q2's revenue was 1.43 billion yuan (yoy -44.0%, qoq +7.7%). It is mainly a public beta of “One Punch Man: World” launched by the company in many overseas countries and regions. The overall performance fell short of expectations, affecting current results. The gross margin was 62.9%. 24Q2 sales expenses were 0.28 billion (yoy -47%, qoq +20%), mainly due to year-on-year reduction in market and distribution expenses; 0.21 billion (yoy +15%, qoq -20%); R&D expenses 0.45 billion (yoy -11%, qoq -9%). The net profit for 24Q2 was -0.15 billion (yoy -206.1%, qoq -394.2%), mainly due to factors such as one-time rental losses due to intensive integration of office spaces and investment losses of invested companies.

The 24H1 game business revenue was 2.65 billion (yoy -27.3%). Several 24H1 games in operation are aimed at long-term operation and continue to carry out content updates and detailed marketing. However, due to the impact of the product life cycle, turnover naturally declined compared to 2023H1. The corresponding performance declined year-on-year, with a gross profit margin of 66.5% (yoy-0.9pp). Among them, mobile game revenue was 1.45 billion (yoy -38.3%) and gross profit margin 67.6% (yoy-3.0pp). PC-side online game revenue 1.09 billion (yoy -4.8%). Q3 expects “One Million King Arthur: Ring” and “Demon Continent 2” to be launched overseas; Q4 expects the “World of Immortals” to be released in the mobile game. In 25, mobile games are expected to be launched in the domestic market one after another: “Alien”, “Immortals 2”, “Persona” overseas, “Code Name: Barbarian”, etc.

23H1 movie production revenue 0.09 billion (yoy -88.3%), gross profit margin 27.8% (yoy+12.0pp). Film and television productions such as “Love Shanghai Junlan”, “Just a Dream of the River and Lake”, “The Lucky Family”, “A Thousand Peaches Bloom”, “The Night Is Intense”, “In Your Time”, “Shh, the King Is Hibernating”, “Skylark Calls Heaven”, and “Security Crisis” are in the process of being produced, distributed, and broadcast.

The company reserves a large number of global products, and “Demon Continent 2”, “One Million King Arthur”, and “Alien Ring” will be launched one after another. We predict that the company's net profit for 24-26 will be -1.68/9.35//0.961 billion (the original value of 24-25 was 1.76/2.18 billion. Due to the slow pace of launch combined with 24 years of talent pool sorting and personnel optimization, we have lowered our profit forecast). Due to abnormal product launches this year, the historical valuation method was used to give 16.2 times PE in 25 years, and a target price of 7.78 yuan was given, and the rating was downgraded to “gain”.

Risk warning

Risks such as falling short of expectations, policy changes, increased purchasing costs, unobtainable versions, exceeding expectations in fees, and fluctuations in fair value and investment returns exceeding expectations