Kaiyuan Securities has released a research report reiterating a "Buy" rating on XD INC (02400), following the company's announcement of an HK dollar share repurchase plan, which demonstrates confidence in its development prospects. Core games such as "XD Town" and "Torchlight: Infinite" are driving revenue growth through new events, IP collaborations, and seasonal updates, while the upcoming new title "RO2" is also attracting significant attention. The company anticipates that its TapTap platform will expand its user base with the launch of several highly anticipated games, with growth further fueled by optimizations in advertising algorithms and the ADN business; the long-term potential of both its gaming and platform operations is viewed positively. Key points from Kaiyuan Securities are as follows: Announcement of a HK$400 million repurchase underscores confidence in the synergistic growth driven by games, TapTap, and ADN. On January 5, the company announced its intention to repurchase up to HK$400 million in shares within five months, signaling strong confidence in its long-term development. With the peak seasons of the winter vacation and Spring Festival approaching, revenue from the core product "XD Town" in the domestic market is expected to increase. The international version of "XD Town" officially launched on January 8 and features a collaboration with the globally renowned IP "My Little Pony," with global pre-registrations exceeding one million. The upcoming title "Ragnarok Origin 2" (abbreviated as "RO2") commenced offline testing on January 17; the institution is optimistic that holiday events for existing games, regional expansion, and new game launches will drive gaming growth. Numerous highly anticipated mobile and PC games are scheduled for launch by 2026, which are expected to help TapTap expand its user base. Coupled with continuous improvements in advertising algorithms, TapTap is poised to maintain rapid growth. The institution also sees substantial potential for the ADN business, which is built upon TapTap's leading algorithm infrastructure. Based on the performance of the domestic launch of "Eather," Kaiyuan Securities has revised down its net profit attributable to parent company forecasts for 2025-2027 to 1.507/2.006/2.387 billion yuan (previous estimates: 1.710/2.352/2.789 billion). At the current share price, this corresponds to a P/E ratio of 21/16/13 times. The firm remains positive on the contribution from the pipeline of games to future earnings and the strong growth trajectory of TapTap/ADN, maintaining the "Buy" rating. "Dense activity schedule for "XD Town" and enhanced IP efforts for "Torchlight" are expected to yield significant long-term operational benefits. On November 29, 2025, a new exhibition event in "XD Town" propelled its ranking on the mainland China iOS game grossing chart to 14th place. On January 3, the game announced a New Year collaboration with "Pleasant Goat and Big Big Wolf," planned to launch a new exhibition on January 8, followed by cumulative login rewards, and will activate a New Year version themed "Auspicious Snow Welcomes Spring" on January 24. The institution believes that active user rewards, a series of events, and collaborations are likely to increase the number of active players and ARPU, thereby driving revenue growth. "Torchlight: Infinite" continues to demonstrate vitality; according to the Sensor Tower official account, the SS10 season "Stacked Realms," launched in October 2025, boosted monthly revenue by 632%. Data from Qimai showed the game reached a peak ranking of 26th on the mainland China iOS game grossing chart in October (the highest since its launch in 2023, excluding the launch period itself). On December 29, 2025, the company announced its intention to acquire the "Torchlight" series IP, with strategic moves around this classic IP expected to contribute to future earnings growth. Among the pipeline games, the open-world MMO "RO2" is expected to launch within 2026. According to the Game Grape official account, as of mid-2025, its predecessor was the company's self-developed product with the highest total revenue. A strong pipeline of upcoming major titles lays the foundation for TapTap's user base expansion, while the ADN business is poised for rapid growth leveraging its advanced algorithms. In the first half of 2025, TapTap's domestic MAU reached 43.63 million (a year-on-year increase of 1%), with user activity also improving year-on-year. With highly anticipated games like "Lock Kingdom: World" scheduled for launch in 2026, the institution is optimistic that TapTap can achieve user expansion by coordinating with major title promotions. TapTap revenue showed strong growth in H1 2025 (up 33% year-on-year), reflecting benefits from advertising algorithm improvements. The institution expects continued growth driven by further algorithm optimizations, and the ADN business, built upon this leading algorithmic foundation, has the potential for rapid expansion. Risk factors include new game launches underperforming expectations and TapTap revenue growth falling short of forecasts.
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