bocom intl expects gaming to resume growth in the second half of the year, with continued high dividend payouts.

Netdragon's gaming business in the first half of 2024 has been temporarily affected by the product launch cycle and overseas factors, but it is expected to recover in the second half of the year. Additionally, a remastered version of the flagship game IP, Magic World, is expected to drive gaming revenue growth in 2025. As for Mynd.ai, its revenue is still facing challenges in digesting the high base of the overseas education market. Short-term revenue recovery lacks visibility, but profitability is expected to improve through cost reduction and efficiency enhancement.We expect the adjusted net income in 2024 to be CNY 1 billion, which corresponds to a price-to-earnings ratio (PE) of 5 for 2024. Considering the expected recovery of the gaming business in the second half of the year and the company's higher dividend yield compared to the industry average, we maintain our buy rating.

The company's gaming business is expected to recover in the second half of the year and achieve growth in 2025. 1) Gaming revenue declined by 3% year-on-year, with a slight increase in domestic PC game revenue, while overseas gaming revenue was impacted by cheating issues, leading to short-term fluctuations. Additionally, the decline in domestic mobile game revenue was due to the suspension of certain games and lack of new game launches. 2) It is expected that gaming revenue will recover and show positive growth in the second half of the year, mainly driven by 2-3 new games such as Magic World, Code-Alpha, and Code-Dragon. The company plans to launch 4-5 new games in 2025, including a remastered version of the Magic World IP for PC and mobile, which is expected to attract returning players and drive revenue growth. The user data of the domestic PC game Magic World has shown significant year-on-year growth, with an increase of 31% in MAU (monthly active users) and 46% in new users. With the improvement of content quality in the future, it is expected to drive ARPU (average revenue per user) growth.