The company achieved revenue of 0.756 billion yuan (yoy +26.27%, qoq +3.00%), net profit of 0.327 billion yuan (yoy +451.29%, qoq +581.80%), deducted non-net profit of 0.119 billion yuan (yoy +6.89%, qoq -9.44%); Q1-Q3 in 2024 achieved revenue of 2.169 billion yuan (yoy -5.20%) and net profit to mother of 0.475 billion yuan (YOY -31.38%), deducting non-net profit of 0.321 billion yuan (YOY -46.85%). Net profit attributable to mother was higher than our previous performance forecast (24Q1-Q3 net profit 0.247-0.267 billion), mainly due to the increase in the amount shown due to changes in fair value. According to “Explanatory Notice No. 1”, the 24Q1-Q3 non-profit and loss amount shown by the company increased by 0.21 billion yuan compared to the original disclosed data. We are optimistic about the resilient performance of the company's casual games and the long-term value of its data element business. Maintain a “buy” rating.

The sharp increase in net profit due to changes in Q3 net profit due to changes in investment income. The main business progressed smoothly 24Q3. The fair value of the company and its subsidiaries increased significantly compared to 23Q3. The main reason was that changes in the fair value of wireless media stocks affected the amount of investment income confirmed under the Company's Equity Law (the impact on the company's investment income was about 0.14 billion yuan). In terms of the game business, in August, the subsidiary Wingman Whipped Egg reached cooperation with 12 offline activity centers. We believe that this move means that while deepening the online market, Wingman Whipped Eggs is also gradually expanding into the offline field, and online and offline are expected to usher in collaboration.

In terms of digital commerce, the subsidiary Communication Brain received an investment of 0.14 billion yuan from the Zhejiang Industrial Fund. Furthermore, Communications Brain and Huawei joined hands to promote the use of the native Hongmeng operating system in media information clients in the province, in line with the development of media integration.

Zhejiang Big Data Trading Center achieved merger. Shareholders' repurchases boosted confidence. On October 21, Zhejiang Big Data Trading Center successfully completed the equity restructuring, and Zhejiang Digital Culture accounted for more than 50% of the shares.

Zhejiang Big Data Trading Center is committed to building a “1+N” integrated data circulation service platform across the province. At the 2024 Data Elements Development Conference, the Zhejiang Big Data Trading Center promoted the establishment of a nationwide mutual recognition mechanism for data insurance services for data trading institutions. We believe that through the merger, resource integration between the two sides will be further strengthened, which is expected to help Zhejiang Big Data Trading Center expand its business and improve the efficiency of scale. Since '24 until September 30, Zhejiang News Media, the controlling shareholder of the company, has increased its shareholding by about 12.66 million shares, accounting for more than 1% of the company's total share capital.

The decline in gross margin was mainly due to changes in the revenue structure. The overall gross profit margin for 24Q3 was 59.68%, down 9.25pct. We expect the digital marketing business with low gross margin to grow rapidly, and its share has increased. Sales/ management/ R&D/ finance expenses ratio 16.22%/13.68%/11.48%/-0.61%, compared with -0.27/ -1.17/ -1.70/ -0.17pct, the cost control results were remarkable. We are optimistic about the company's development in the field of data elements, while the core business is progressing smoothly.

We maintain our profit forecast. We expect the company's net profit to be 0.54/0.67/0.77 billion yuan in 24-26 years, with a target market value of 17.06 billion yuan under the segmented valuation method, corresponding to a target price of 13.47 yuan. Maintain a “buy” rating.

Risk warning: Data elements are progressing slowly, game-related policy risks, and investment business falls short of expectations.