NETDRAGON(00777) 交银国际证券·2024-08-31 03:42Investment Rating - The investment rating for the company is "Buy" with a target price of HKD 14.00, indicating a potential upside of 32.8% from the current price of HKD 10.54 [1][3]. Core Views - The company is expected to see a recovery in game revenue in the second half of 2024, driven by new game launches, particularly a reboot of its flagship IP, "Magic Domain," in 2025. The first half of 2024 experienced a revenue decline due to product launch cycles and external factors, but profitability is expected to improve through cost reduction and efficiency measures [2][3]. - The adjusted net profit forecast for 2024 is set at RMB 1 billion, with a downward revision of the target price from HKD 15 to HKD 14 [2][3]. Financial Performance Summary - In the first half of 2024, total revenue decreased by 10% year-on-year to RMB 3.3 billion, with adjusted net profit at RMB 558 million, down 5% year-on-year. Game and Mynd.ai revenues fell by 1% and 23% respectively [2][6]. - The company’s game revenue is projected to recover in the second half of 2024, with anticipated positive growth driven by 2-3 new game releases [2][6]. - The financial forecasts for 2024E to 2026E show a decline in revenue estimates, with total revenue expected to be RMB 6.545 billion in 2024, down 13% from previous estimates [3][9]. Key Financial Metrics - The company reported a gross profit margin of 66.6% for 2024E, reflecting an increase from 61.9% in 2023 [3][9]. - The adjusted operating profit margin is projected to be 17.8% for 2024E, up from 16.7% in 2023 [3][9]. - The forecasted net profit for 2024 is RMB 1.007 billion, with a net profit margin of 15.9% [9].