3Q25 inline 5% YoY total revenue was contributed by inline -17% YoY game, outperformed +23% YoY ad and underperformed +7% YoY VAS against BOCIe. RMB688m adj. op exceeded consensus by 6%. We deem ad will continue its solid growth momentum driven by consistent multi-factors and three games (Sanmou, Duckov and Ncard) will attract spotlights in coming quarters. We continue to appreciate L-T IP monetisation opportunities of Duckov while cutting our Ncard 2026 contributions mainly due to its DAU-prioritised light monetisation strategy after launching in late 1Q26. Maintain BUY but cut our TP to US$31.0/ HK$244.0, implying 25x 2026E adj. PER.
Key Factors for Rating
“Duckov” continues to gain traction; “Ncard” launch in late 1Q26. “Escape from Duckov” maintained its momentum to sell 3m copies in total as of noon 8 Nov. We recommend to keep an eye on its confirmed console and mobile versions, skin rollouts and further IP operations. “Sanguo: Ncard” initiated its first paid wipe test on 30 Oct, drawing wide player interest through its innovative gameplay, realistic art style and historically backed character design. We observe heated discussion surrounding i) character balancing and in-match roaster; ii) social features including in-game chat and team-up function (currently only single-player 3v3 or 5v5); and iii) monetisation mechanisms. We believe the critical factors to the game’s success lie in highlighting its differentiated asymmetric battle experience and leveraging Co.’s robust content ecosystem to reach a broader audience. We now expect “Ncard” will launch in late 1Q26 and start contributing revenue from 2Q26 at an accelerating pace due to Co.’s DAUprioritised light monetisation operation strategy. We see ad will continue to be solid on Co.’s dedicated executions of client and scenario expansion, ad infrastructure upgrades and AIGC. Thus, we cut our FY2026-27 total revenue forecasts by 1% mainly due to 5-7% cut of game revenue largely on our latest “Ncard” estimates, partially offset by 1% increase of ad revenue estimates. Our decreased FY2026-27 bottom line forecasts mainly reflect decreased “Ncard” contributions and largely unchanged opex assumptions.
3Q25: profit beat. Total revenue grew 5% YoY to RMB7.7bn, in line with consensus. MAUs/DAUs grew 8% YoY/9% YoY to 376m/117m respectively. DTSPU was also up 6mins YoY to 112mins, and monthly paying users grew by 17% to 35m. Mobile game revenue dipped -17% YoY due to SanMou’s high base. Online ad continued to outpace industry and market expectations at +23% YoY, mainly driven by rapid growth in brand and Sparkle ads. 36.7% GPM was inline. 9.0% adj. OPM/10.2% adj. NPM beat consensus of 8.5%/8.4%. Deferred revenue was 8% YoY/4% QoQ. As of Sep-end 2025, Co. has US$83.6m remaining buyback quota till Nov 2026 and plans to fully utilise it.