CICC: Maintains XD INC (02400) Outperform rating, raises target price to 98.7 Hong Kong dollars.

CICC released a research report stating that it maintains XD INC (02400) 's net profit forecast for the years 25-27 at 14/17/20 billion yuan. The current price corresponds to a P/E of 20/17 times for the years 26/27. It maintains an outperform industry rating, considering the scarcity of Tap ecosystem and the valuation premium, raising the target price by 10% to 98.7 Hong Kong dollars (P/E of 26/27 times), with an upside potential of 26%. Key points from CICC: Core issues of concern: How is TapTap upgrading from a "traffic distribution channel" to an "industrial service infrastructure" through creating a full-cycle B-end service ecosystem covering "research and development, testing, online, and long-term operation" for games? How did the Dirichlet business come about? How did TapTap Manufacturing achieve the landing of Vibe coding game? Upgrading the business model, TapTap To B service ecosystem gradually forming a closed loop, covering the entire industry chain. TapTap is transitioning from a single game distribution platform to a full industry chain service provider of "research and development-distribution-operation". By integrating developer tools, data services, and community ecology, it is building a closed-loop game industry infrastructure. Its strategic core is to penetrate various aspects of the game lifecycle with technical mid-end capabilities, forming a synergistic effect of "traffic+tools+profit". The research believes that its construction of the B-end service matrix enhances business stability and profit diversity, helps smooth industry cycle fluctuations, and drives the company's valuation shift from a "game company" to a higher premium "ecosystem platform" logic. Efficiency improvement driven by advertising technology, Tap's internal and external advertising coverage further enhanced. With a deep understanding of high-value game category users and continuous iteration of self-developed advertising algorithms, TapTap has optimized advertising costs and improved conversion efficiency. Based on this, the emerging Dirichlet advertising aggregation platform replicates this capability to a broader off-site market. By integrating industry traffic, the research believes it is expected to open up new growth poles and support the main site's algorithmic capabilities. UGC tools stimulate ecosystem vitality, AI exploration locks in long-term growth and value space. The Spark Editor and "TapTap Manufacturing" AI tools have greatly lowered the threshold for game creation, converting a massive number of players into potential creators. This not only provides TapTap platform with exclusive low-cost content supply but also preliminarily builds a closed-loop from creation, distribution to commercialization, the research believes the platform is expected to open up an internal creator economy in the future, forming an ecological moat. Risk warning: Changes in industry policies, intensified industry competition, AI application progress lower than expected, macroeconomic impacts on entertainment demand, and game performance lower than expected.