The company achieved revenue of 0.859 billion yuan (yoy -10.36%, qoq -16.83%) and net profit of 0.14 billion yuan (yoy -23.82%, qoq -47.19%) in 24Q3. 24Q1-Q3 achieved revenue of 2.818 billion yuan (yoy -14.77%), net profit of 0.658 billion yuan (yoy -23.48%), deducting non-net profit of 0.613 billion yuan (yoy -25.54%). The company plans to pay a cash dividend of 20 yuan (tax included) for every 10 shares, for a total of 0.143 billion yuan. The company's total cash dividend for 24Q1-Q3 is 0.466 billion yuan, accounting for 78.9% of the current net profit to mother. We are optimistic about the company's ability to operate long-term products and excellent self-research capabilities. With the arrival of Christmas and New Year events, Q4 product flow is expected to improve month-on-month, and many new self-developed products are expected to be launched in 25 years, maintaining a “buy” rating.

Q3 stock game sales continued to decline year over year. Overseas games achieved high growth in terms of stock: 1) “Q3” 24Q1-Q3 achieved revenue of 0.881 billion yuan, same increase of 7.71%, Q3 turnover 0.225 billion yuan, same decrease of 11.4%, mainly due to quarterly turnover fluctuations; 2) “Q1 to Q3” achieved sales volume of 1.612 billion yuan, a year-on-year decline of 14.1 percent, of which 24Q3 turnover was 0.452 billion yuan, a year-on-year decrease of 13.6%; 3) “Easy Thinking” 24Q1-Q3 achieved turnover of 0.479 billion yuan, a decrease of 46.4%, of which 24Q3 turnover was 0.169 billion yuan, a year-on-year decrease of 18.0%, which is significantly narrower than 24H1's 54.8% year-on-year decline. 24Q1-Q3's overseas revenue also increased 99.57% to 0.255 billion yuan, mainly due to the company's overseas launch of “Fly Dragon Rider”, “Monster Never Cry (European and American version)”, and “Outpost: InfinitySiege (Steam International Edition)”, etc., but the overseas business has not yet been profitable.

Net profit to the mother fell 47.2% month-on-month, mainly due to declining turnover and increased investment costs for some products, etc. In 24Q3, net profit to the mother was 0.14 billion yuan, which fell 47.2% month-on-month. The main reason for the decline was large:

1) The flow of core products declined. Q2 was the anniversary of the mobile game and mobile game, and Q3 sales fell month-on-month; 2) The increase in marketing costs, including the launch of “Monster Never Cry” in September in Hong Kong, Macao, Taiwan, and South Korea, increased marketing investment. In addition, “Easy Thinking” also increased sales in July, but revenue growth was less than marketing, but we expect the August to September launch situation has been adjusted; 3) The impact of fixed expenses such as employees is relatively rigid; 4) Expected to have a certain impact on exchange gains and losses and interest.

Q4's performance is expected to improve. Looking forward to the 25-year new product cycle, maintaining the “Buy” company's 24-year launch of new products such as “Immortal Family”, “Flying Dragon Knight (Overseas Edition)”, “Shenzhou Thousand Foods”, and “Monster Never Cry (Overseas Edition)”. Looking forward to the future, we expect “Q4” to launch Christmas and New Year's cycle activities and special services, which is expected to drive sequential growth. The company's self-developed game reserves “Asking for the Eternity of Sword” and “Legend of the Sword Battle” are expected to be launched in '25. Considering that the decline in the company's core product flow exceeded expectations, we lowered our 24-year profit forecast. We expect the company to achieve a net profit of 0.91/1.18/1.32 billion yuan (previous value of 1.07/1.18/1.32 billion yuan) in 24-26. Comparable to the company Wind in '25, the average PE was expected to be 13X. Considering the company's abundant reserves of subsequent products, the target price was 262.08 yuan (previous value 222.79 yuan), maintaining the “buy” rating.

Risk warning: New product launch performance falls short of expectations, increased purchasing costs, industry policy risks.