CICC has released a research report maintaining its net profit attributable to parent company forecasts for XD INC (02400) at RMB 1.4 billion, RMB 1.7 billion, and RMB 2.0 billion for 2025 to 2027. The current share price implies a price-to-earnings (P/E) ratio of 20 times for 2026 and 17 times for 2027. The firm reiterates its Outperform industry rating. Considering the valuation premium warranted by the scarcity of the TapTap ecosystem, CICC has raised its target price by 10% to HK$98.7, which implies P/E ratios of 25 times for 2026 and 21 times for 2027, suggesting a 26% upside potential. The main viewpoints from CICC are as follows:
The core focus is on how TapTap is evolving from a "traffic distribution channel" to an "industrial service infrastructure" by building a comprehensive B2B service ecosystem that covers the entire game lifecycle, including "R&D, testing, launch, and long-term operations." Key developments include the emergence of the Dirichlet business and the implementation of Vibe coding games through TapTap制造 (TapTap Manufacture).
With a business model upgrade, TapTap is progressively building a closed-loop for its To B service ecosystem, achieving full industrial chain coverage. The platform is transitioning from a singular game distribution platform to a comprehensive service provider spanning "R&D-distribution-operations." By integrating developer tools, data services, and community ecosystems, it is constructing a closed-loop gaming industry infrastructure. The strategic core lies in leveraging its technological platform capabilities to penetrate all stages of the game lifecycle, creating a synergistic effect of "traffic + tools + monetization." It is believed that the established B2B service matrix enhances business stability and profit diversity, helping to smooth out industry cyclical fluctuations and driving a shift in the company's valuation logic from a "game company" to a higher-premium "ecosystem platform."
Driven by advertising technology, efficiency is improving, and advertising coverage is expanding both on and off the TapTap platform. Leveraging its deep understanding of high-value gaming vertical users and its continuously iterating proprietary advertising algorithms, TapTap has optimized advertising delivery costs and improved conversion efficiency. Building on this, the newly emerged Dirichlet advertising aggregation platform replicates these capabilities to the broader off-site market. By integrating industry traffic, this initiative is seen as potentially opening up a new growth driver and, in turn, enhancing the main platform's algorithmic capabilities.
UGC tools are stimulating ecosystem vitality, with AI exploration aimed at securing long-term growth and value potential. Tools like the Spark Editor and the "TapTap制造" AI tools significantly lower the barrier to game creation, transforming a massive player base into potential creators. This not only provides TapTap with exclusive, low-cost content supply but also initially builds a closed loop from creation and distribution to commercialization. This development is viewed as having the potential to unlock an endogenous creator economy within the platform, forming an ecosystem moat.
Risk factors include changes in industry regulations, intensifying industry competition, slower-than-expected progress in AI application, macroeconomic impacts affecting entertainment demand, and game performance falling short of expectations.