Soochow Securities forecasts NETDRAGON's (00777) net profit attributable to shareholders for 2025–2027 at RMB400 million, RMB670 million, and RMB680 million, respectively, with corresponding P/E ratios of 13.6x, 8.1x, and 8.0x. Using the SOTP valuation method, the firm assigns a target market cap of RMB8.5 billion, translating to a target price of HK$17.59 per share. The brokerage highlights the company’s stable game operations, education sector benefiting from equipment replacement cycles, AI-driven efficiency gains, and diversified investments as key growth drivers, warranting a first-time "Buy" rating.

**Gaming: Evergreen IPs and AI-Driven Efficiency** NETDRAGON has long dominated the MMORPG space with flagship titles like *Conquer*, *Eudemons Online*, and *Heroes Evolved*, demonstrating strong user retention and operational longevity. *Eudemons Online*, in particular, remains a benchmark product in China’s MMORPG market after nearly two decades, sustaining high operating margins. The company’s "AI + Gaming" strategy has integrated AI into art production, coding, and multilingual localization, enabling cost-effective global expansion (e.g., overseas versions of *Heroes Evolved*) and faster "PC-to-mobile" conversions. AI adoption reduced R&D expenses in the gaming segment by 26.7% YoY in H1 2025, with further efficiency gains expected to boost profitability.

**Education: Leadership in Interactive Displays and AI+SaaS Transition** Subsidiary Mynd.ai, a global leader in interactive education displays, has sold 1.37 million units of its Promethean brand from 2016–2024, capturing ~16% of the global installed base market by 2024 and serving over 1 million classrooms worldwide. With pandemic-era North American device replacements nearing, a new upgrade cycle is imminent. Mynd’s SaaS ecosystem is taking shape, with *Explain Everything* showing steady growth. The acquisition of Merlyn Mind’s AI voice assistant enhances hardware-software integration, strengthening the "Hardware + SaaS" moat and accelerating the shift to higher-margin "AI + SaaS" subscriptions. Soochow expects Mynd to turn profitable as hardware refresh cycles and SaaS transformation converge.

**Strategic Investments: AI, AR, and Entertainment for Long-Term Growth** NETDRAGON’s "dual-core + strategic investments" approach focuses on AI, AR hardware, and entertainment to synergize with its gaming and education businesses. Key bets include: - **AI**: Subsidiary Cherrypicks partnered with WENGE to co-develop AI models, positioning NETDRAGON as WENGE’s exclusive overseas commercialization partner. - **AR/Metaverse**: Investment in AR glasses leader Rokid explores new applications in education and gaming. - **Entertainment**: Stake in ShuaiKu Network taps into group live-streaming, offering cross-promotion channels for gaming IPs and education user acquisition. The company also joined the Open-Q ecosystem to build AI-powered educational metaverse infrastructure, leveraging its AI production center for tokenized revenue streams.