24Q3 revenue was RMB 0.859 billion (yoy -10.36%, qoq -16.83%). The year-on-year decline was mainly due to a decline in sales of core products. In particular, the revenue of “Wendao Mobile Game”, “Wendao Mobile Game”, and “Happy Thinking (Mainland Edition)” declined year-on-year. We expect 24Q4 sales to increase month-on-month, mainly due to the launch of the new Q4 game “Fengshen Fantasy World” and the “Ask” Q4 recurring event. 24Q3 gross profit margin 89% (yoy +2%, qoq +2%). Sales expenses 0.248 billion yuan (yoy -3%, qoq +2%); management expenses 0.086 billion yuan (yoy +9%, qoq -1%); R&D expenses 0.192 billion yuan (yoy +6%, qoq -6%).

Net profit for 24Q3 was 0.14 billion yuan (yoy -23.82%, qoq -47.19%). The year-on-year decline was mainly due to (1) “Enquiry Mobile Game”, “Enquiry Mobile Game”, and “Easy Thinking (Mainland Edition)”, and a sharp decrease in operating income; the month-on-month decrease was mainly due to (1) the month-on-month decline in revenue and profit after the “Wendao Mobile Game” 8th anniversary event. (2) Since the increase in distribution investment exceeds the increase in operating income, the overall profit of “One Mind” declined sharply from month to month.

Product reserves: Self-developed games include the Xiuxian placement category “Asking the Sword for Eternity” M72 (version number obtained), the magic-themed placement category “Legend of the Sword and Sword (code number M88)” (version number obtained, launched overseas in the first half of 2025), the strategic tower defense category “The Strongest Castle” (version number obtained), and Western Fantasy themed placement category M11. Agent games include simulated business strategy and RPG development “Wangdu Genesis” (released 2024.9.23), the Guofeng-themed RPG “Fengshen Fantasy World” (released domestically on 10/16/24), the urban mystery and suspense strategy category “Echo of Vision” (released domestically on December 30, '24), the sci-fi strategy card SLG “One Hundred Million Light Years”, the strategy card battle “Chong Ah, the Primitive” in the business simulation category, etc.

The company's Q4 is the peak season for the core product “Ask Me”. Self-developed games such as M72 and M88 have received version numbers. We expect net profit to be 0.901/1.161/1.179 billion yuan for 24/25/26 respectively (the original value was 1.017/1.313/1.332 billion yuan. Due to adjustments to game flow forecasts, the profit forecast was adjusted by increasing the rate). Based on a comparable company's 2024 P/E adjustment average of 17 times, we gave the company a target price of 212.50 yuan to maintain the “gain” rating.

Risk warning

Game version uncertainty; uncertainty about new product availability; risk of increasing purchase volume costs; risk of increasing R&D expenses; risk of asset impairment