Event: The company released its 2024 semi-annual report, achieving operating income of 2.221 billion yuan, YoY +26.7%; net profit to mother of 0.205 billion yuan, YoY +127.4%, adjusted net profit of 0.237 billion yuan, YoY +110.0%, adjusted profit before interest, tax, depreciation and amortization of 0.319 billion yuan, YoY +72.7%.

“Muffin” performed well, driving rapid growth in game revenue. 1H24's game business revenue was 1.486 billion yuan, up 29.3% year on year. The average monthly active users of 1H24 online games were 9.53 million, the payment rate increased by 1 pct to 11% year over year, and the average monthly paid user game spending increased 68% to 218 yuan year over year, mainly driven by three new self-developed games: “Let's Go Muffin”, “Sword of the Suzuran” and “Torchlight: Infinite”. “Let's Go Muffin” was launched in Hong Kong, Macao and Taiwan in January of this year, and in mainland China in May. According to Qimai statistics, as of August 30, the mainland Chinese version of the game ranked 17th on average in the iOS best-selling list. Since July, the average ranking has been ranked 24th. The turnover performance has exceeded expectations, and profits are expected to continue to be released in the second half of the year.

TAPTAP has seen a significant increase in the number of active users. 1H24's information service business revenue was 0.734 billion yuan. Benefiting from the launch of many popular games and the increase in TapTap marketing activities, advertising revenue increased 21.7% year over year. The average number of monthly active users of the 1H24 TapTap China app was 43.24 million, an increase of 27.3% over the previous year.

Self-developed products continue to be realized. The company's self-developed and simulated mobile game “Heartbeat Town” was launched in July, with over 25 million downloads in the first month. The Android channel is exclusive to TapTap, bringing a large number of new users and increasing platform activity. According to Qimai statistics, it has ranked 37th in the iOS game bestseller list since its launch, showing impressive performance. It is expected to rely on social fission to bring about continued growth in new players, and focus on long-term operation and commercialization. The company plans to launch “Let's Go Muffin” in many overseas countries and regions in the second half of this year.

Profit forecast: The company's net profit for 24/25/26 is expected to be 0.657/0.874/1.089 billion yuan, a year-on-year loss of +33%/+25%. The performance of self-developed products exceeds expectations and maintains a “buy” rating.

Risk warning: self-developed game performance falls short of expectations; platform user growth is slowing down; policy risks