CICC: Maintain Outperform rating on DAMAI ENT (01060), target price of 0.9 Hong Kong dollars.

CICC releases research report, stating that DAMAI ENT (01060) current price corresponds to 18.3/15.5 times FY27/28 adjusted P/E. Maintains outperform industry rating. Considering the industry valuation level has fallen, the target price is 0.9 Hong Kong dollars, corresponding to 27.4 times FY27 adjusted P/E, which is a 50% upside potential from the current price, introducing FY28 adjusted net profit of 1.008 billion yuan. CICC's main points are as follows: FY26 performance meets market expectations The company announced FY26 performance: revenue of 8.024 billion yuan, an increase of 20%; net profit attributable to owners of 705 million yuan, an increase of 94%, meeting the performance forecast of net profit not less than 700 million yuan; Non-IFRS EBITA 746 million yuan, a 15% increase compared to FY25 on a comparable basis. DAMAI GMV continues to grow, international business still in investment period According to the announcement, the company's FY26 performance revenue is 2.28 billion yuan, an increase of 11%; subsidiary performance is 1.19 billion yuan, a decrease of 4%, mainly due to the impact on gross profit margin of expanding innovative businesses. Ticketing: DAMAI GMV continues to grow and maintain industry leadership; Content: Accelerating upstream extension of the industry chain; Overseas expansion: According to performance meetings, DAMAI's international business will be gradually verified in Southeast Asia/Japan and Korea/North American markets, continuing cautious expansion. The bank believes that domestic performances are expected to grow steadily in FY27, and recommends paying attention to the synergistic benefits of variety/performances/commercialization and the medium-term profit turning point of overseas business. Diversified layout of IP derivatives, profitability recovery in movie business IP derivatives: According to the announcement, FY26 IP derivative revenue is 2.17 billion yuan, an increase of 60%; subsidiary performance is 400 million yuan, an increase of 12%, mainly due to the impact of the suspension of Jinli Naqu and the increase in proportion of self-sufficiency; Chiikawa flagship stores in Shanghai/Hangzhou have good sales performance, and the company plans to expand stores and enrich types. According to performance meetings, the company's collaboration with Tengyi's AI trendy design platform "Mioya" has received good feedback on product testing, and the offline flagship store LuckyLoop continues to explore self-owned IP opportunities. The bank predicts that FY27 IP derivative revenue will increase by 50%, mainly driven by retail volume, and recommends paying attention to progress in marketization of self-owned IPs and margin improvement space. Movies: Significant profitability recovery after strategic reform, the bank believes "The Letter to Grandma" may contribute to incremental profit in FY27. Focus on margin improvement space According to performance meetings, in FY27, the company will increase investment in international performances/ content expansion/self-sufficient derivative products. The bank believes that the diversified business layout may result in short-term cost increases, and recommends focusing on medium-term output gains, such as overseas performance returning revenue, margin improvement in self-owned IPs, AI cost reduction and efficiency enhancement, and successful innovation formats. Risk warning: New business investment costs higher than expected, intensified industry competition, increased regulatory tightening.