The basic game is strong and steady, and the game's overseas expansion is speeding up. According to the company's financial report, 24Q1-3's revenue was 3.93 billion yuan (YoY +30%), net profit was 1.28 billion (YoY +18%); of these, 24Q3 revenue was 1.37 billion (+30% YoY, +10%), and net profit to mother was 0.47 billion (+32% YoY, +23% YoY). The company's 24-year performance has been outstanding, mainly due to: 1) the steady performance of its subsidiary Zhejiang Shenghe's “Legend of the Blue Moon”, “Legend of Wang Zhe”, and “Hot Bloods” long-term operation products; 2) The advertising revenue of game community platforms has increased, and the information service business has increased revenue. 3) Contributions increased after the overseas edition of “Legend of Sword and Fairy: A New Beginning” went live in July.

AI+IP is being actively promoted. The company actively promotes IP cooperation: Kaiying and Century Huatong signed a “Strategic Cooperation Agreement” to cooperate more closely in all aspects of the business form, IP upstream and downstream ecology and brands of legendary series and legendary world products. AI aspect: 1) The company's self-developed “shape and meaning” model has been applied in actual R&D scenarios since 2023 to increase efficiency in R&D; 2) Kaiying's intelligent NPC text generation algorithm developed by the company has passed the review and has been approved for the filing number.

Product reserves are abundant, and production capacity is being released. In October '24, the casual puzzle game “Pikkling” was launched, and the mobile game “Rainbow Orange” officially began public beta. Follow-up product reserves: “Tomb Raiding Notes: Departure” is open for pre-order, “Doulo Continent: Legend of Evil”, “Dragon Valley World”, “Nasalik: Rise”, “Three Kingdoms: The World Returns”, “Code Name:

“Nobunaga”, “Code Name: DR”, and “Dragon Legend” are all progressing in an orderly manner. In addition, well-known IP-licensed mobile games such as “BLEACH: A Thousand Year Blood Battle”, “Altman”, a 3D action game authorized for the global market, “The King of Fighters”, “The King of Fighters”, “The Legend of Condor Heroes,” and “Dragon Warrior Series Novels” are being developed.

Investment analysis opinion: Maintain a “buy” rating. Referring to the pace of the company's launch in '24, we raised the company's net profit forecast for 24-26 to 1.743/2.04/2.348 billion yuan (the original forecast was 1.683/1.965/2.211 billion yuan), corresponding to the 24-26 PE to 17/15/13x, respectively. Considering the company's stable base in the Legendary/Miracle category, innovative games are expected to break through and maintain a “buy” rating.

Risk warning: Marginal changes in industry regulatory policies, game project delays/performance falls short of expectations.