Cinda International has issued a research report assigning a "Buy" rating to XD INC (02400). The company's self-developed game, "XD Town," launched its international version in January with strong performance, demonstrating impressive download volumes and revenue, which lays a foundation for future earnings growth. Revenue from existing evergreen games remains stable, while new titles such as "Eather" provide ample reserves for sustained contributions. The TapTap platform has driven revenue and gross margin improvements through algorithm optimization, with the PC version and upcoming major new games expected to further expand the ecosystem. The company has initiated a share repurchase program, and market expectations for its profit growth are optimistic, with a potential positive profit alert announcement in the short term. Key points from Cinda International are as follows:

The international version of "XD Town" launched in January, showing impressive download and revenue metrics. The self-developed life simulation game was released internationally on January 8. According to AppMagic's global mobile game download rankings for January, "XD Town" entered the chart directly at 11th place, with global downloads exceeding 12 million, primarily from the United States, Japan, South Korea, and Thailand. Estimated revenue for the international version (including AppStore and GooglePlay) in January reached RMB 60 million, not accounting for revenue from TapTap. Japan contributed the highest proportion of revenue, followed by South Korea and the United States. The data indicates strong market acceptance for "XD Town," establishing a basis for long-term operation and growth in 2026 performance.

Stable existing games and promising new releases are expected to drive continued performance growth. The group's performance for the first half of 2025 exceeded expectations, with revenue increasing 39% year-on-year to RMB 3.08 billion and adjusted profit growing 206% to RMB 850 million, surpassing market forecasts by 14% and 74% respectively, primarily due to stronger-than-expected growth in games and the TapTap platform. The group maintains several evergreen game products, including "Ragnarok M:初心服," "XD Town," and "Torchlight: Infinite," which have stable user bases and increasing willingness to pay. Among these, "初心服" saw game operating revenue (net basis) grow 3.2 times year-on-year in the first half, reaching RMB 280 million. Overall, game segment revenue for the first half was RMB 2.07 billion, a 39% year-on-year increase. Average monthly active users for online games rose 20% to 11.41 million, while average monthly paying users grew 21% to 1.32 million. For evergreen game products, the group plans continued research and development investment to attract more players. Additionally, the new game pipeline is robust; "Eather," since its international launch in June, has performed strongly and entered all East Asian markets, including China, in September. The market expects "Eather" to contribute incremental performance in the second half.

TapTap's advertising algorithm improvements drove a 1.1 percentage point increase in gross margin. As the group's platform ecosystem, TapTap's Chinese app saw average monthly active users increase 1% year-on-year in the first half. Optimization of advertising algorithms and enhanced user activity pushed TapTap revenue up 38% year-on-year to RMB 1.01 billion, with segment gross margin rising 1.1 percentage points to 83.6%. The group launched the TapTap PC version in April 2025, aligning with the industry trend of multi-platform connectivity. Highly anticipated games scheduled for release in 2026, such as "洛克王国" and "异环," are expected to expand the user base. Combined with ongoing advertising algorithm improvements, this should boost both the volume and price of advertisements, positioning TapTap for sustained high growth.

Share repurchase program initiated in January, with a potential positive profit alert in the short term. The group began an automatic share repurchase plan in January, aiming to buy back up to RMB 400 million in shares by June 4, demonstrating confidence in business prospects. According to consensus forecasts, the market expects compound annual growth rates for revenue and adjusted profit from 2024 to 2027 to be 17% and 33% respectively. The current share price implies forward price-to-earnings ratios of approximately 21 times for 2025 and 18 times for 2026. Market expectations project adjusted profit for 2025 to increase 85% year-on-year to RMB 1.62 billion. A positive profit alert may be issued shortly, and if results exceed market expectations, a valuation re-rating could occur.