In "Major Banks," China International Capital Corporation (CICC) lowers XD INC's target price to 89.5 yuan and revises earnings estimates downward

CICC's research report points out that XD INC (02400.HK) game "Torchlight" has a bright new season, with a certain increase in players. "XD Town" has strengthened its commercialization operations during the summer, and it is estimated that revenue will increase compared to the first half of this year. The performance of "Ethereal" in the four East Asia servers after its September launch has been mediocre. CICC believes this is mainly due to factors such as balance issues and user matching, estimating that it will contribute limited revenue this year and have a certain negative impact on profits. Additionally, the overseas performance of "Ragnarok" has also declined quarter-on-quarter, affecting profits.

CICC stated that considering "XD Town" has been operating in the domestic market for over a year, the relevant content materials can be reused, and it is estimated that its overseas version's initial level of commercialization is higher than that of the domestic version during the same period. However, due to the mediocre performance of "Ethereal" in the East Asia region, the net profit forecast for XD INC for 2025 and 2026 has been lowered by 13.5% and 13.1%, respectively, to RMB 1.4 billion and RMB 1.7 billion, corresponding to a price-to-earnings ratio of 21 times and 17 times for 2025 and 2026 at the current price.

CICC maintains an "outperform industry" rating for the stock, and due to the adjustment of profit forecasts, switching to the 2026 valuation, and considering platform valuation premiums, the target price has been lowered by 4% to HKD 89.5