Event: Gigbit releases third quarter 2024 results report. The company achieved revenue of 2.82 billion yuan in the first three quarters of 2024, a year-on-year decrease of 14.77%; realized net profit of 0.658 billion yuan, a year-on-year decrease of 23.48%, a year-on-year net interest rate of 23.3%; net profit after deducting non-return to mother was 0.613 billion yuan, a year-on-year decrease of 25.54%, after deducting a net interest rate of 21.8%.

Comment:

Performance declined month-on-month, and the company continued to have high dividends. In the third quarter, the company achieved revenue of 0.859 billion yuan, down 16.83% month-on-month and 10.36% year-on-year; realized net profit of 0.14 billion yuan, down 47.19% month-on-month, 23.82% month-on-month, net interest rate 16.3%, 9.3pct month-on-month, and 2.9pct year-on-year; after deducting non-return net profit of 0.151 billion yuan, down 43.01% month-on-month, down 15.33% year-on-year, down 17.6% month-on-month 8.1 pct, a year-on-year decrease of 1.0 pct.

The company continued to give back to investors with high cash dividends. The dividend ratio for the first three quarters was 70.94%.

The flow rate of some core products fluctuates due to seasonal factors. “Enquiry” mobile game 24M1-M9 turnover was 0.881 billion yuan, an increase of 7.71% over the same period last year. The single-split 24Q3 turnover was 0.225 billion yuan, a year-on-year decrease of 11.42%. “Enquiry Mobile Game”'s 24M1-M9 sales volume was 1.612 billion yuan, down 14.13% from the same period last year, and the 24Q3 sales volume fell 12.62% year over year. The average ranking was 52nd in the App Store game bestseller list, up to 31st place in the list. Due to the good results of the game's 8th anniversary campaign in Q2, revenue and profit for the third quarter declined compared to the second quarter. “Easy Thinking” 24M1-M9 sales volume was 0.479 billion yuan, down 46.40% from the same period last year. The 24Q3 sales volume alone was 0.168 billion yuan, down 18.45% year on year. The average ranking of games on the App Store was 77th, reaching 29th place on the list. The game's Q3 revenue increased slightly month-on-month, but overall profit declined even more month-on-month due to launch effectiveness factors.

The company has rich reserves of subsequent products, and the new product cycle is worth paying attention to. Looking ahead, in addition to the four major versions of New Year's, Anniversary, Summer, and National Day, “Ask Me Mobile Game” plans to launch new special features in November, which is expected to improve the game's performance in Q4. In addition, the company's “Ask Sword Eternity (code: M72)” and “The Legend of Sword and Sword (code code M88)” products have been tested for the first time from August to September. The company will adjust and optimize these two products based on test data and player feedback. It plans to start a second test within the year, and is scheduled to launch on 2025H1.

Profit forecast and investment rating: Optimistic about the company's dividend stability and looking forward to the launch of the new game. As the company's stock products are still under pressure, we lowered the company's performance forecast. Operating revenue for 24-26 is 3.752/4.309/4.702 billion yuan, respectively, -10.3%/14.8%/9.1%; net profit to mother is 0.878/1.089/1.268 billion yuan, respectively, -22.0%/24.1%/16.4%. The corresponding valuation on October 25 is 17x/14x/12x, continuing to maintain the “buy” rating.

Risk factors: Industry policy risks, core game performance falling short of expectations, overseas market games falling short of expectations, and overseas game revenue performance risks due to exchange rate fluctuations.