First Shanghai released a research report maintaining a "Buy" rating for NetDragon (00777), emphasizing the stability of the company's gaming business and the potential market space for its education business. The steady development of gaming IP, continued expansion in overseas markets, and successful promotion of tablet products are expected to bring new performance growth to the company. Therefore, the firm remains confident about the company's future. While maintaining the previous valuation methodology, based on 2025 earnings forecasts and adjusted exchange rates, the target price is set at HK$17.27, representing a 55% upside from the previous closing price.

First Shanghai's main viewpoints are as follows:

**H1 2025 Performance**

NetDragon achieved revenue of RMB 2.38 billion in the first half of 2025, with gross profit of RMB 1.7 billion and gross profit margin increasing by 2.9 percentage points year-over-year to 69.5%, reflecting enhanced overall profitability. Operating expenses totaled RMB 1.35 billion, down 15.6% year-over-year. The group's cost optimization and efficiency improvement measures have begun to show initial results and are expected to be more fully reflected in the second half of 2025. The company's current financial position is solid, with net cash of approximately RMB 1.5 billion and holdings of 12,000 Ethereum as digital asset reserves. Meanwhile, the company announced an interim dividend of HK$0.5 per share and committed to providing shareholders with total returns of no less than HK$600 million through dividends and share buybacks within the next year.

**Gaming Business**

In the first half of 2025, the company's gaming and other businesses generated revenue of RMB 1.74 billion, showing signs of stabilization and recovery compared to the second half of 2024. Among these, "Eudemons Online" MAU increased by 11% year-over-year, and mobile version revenue also achieved sequential growth, reflecting improved user activity and retention levels, with continuously optimized player experience. Through ongoing cost reduction and efficiency improvement efforts, the business's operating profit margin recovered sequentially to 28.8%, approaching historical normal levels. In terms of product pipeline, "Code MY" launched small-scale testing in August and is expected to officially launch next year; "Eudemons Online" and "Code Alpha" are planned for launch in multiple overseas markets in the second half; "Final Oath" is actively expanding into lower-tier markets and diversified channels; "Mecha" mobile game is expected to launch next year; additionally, the mini-game version of "Eudemons Legend" was launched in the first half. Combined with initial cost reduction and efficiency gains under the AI+gaming strategy, the firm expects the gaming business to stabilize and recover.

**Education Business**

Mynd.ai business revenue reached RMB 640 million in the first half of 2025. To address challenges from global education technology spending contraction, the company will continue to pursue cost optimization; against the backdrop of weak performance in traditional European and American markets, the company is actively exploring emerging markets to seek new growth opportunities. Overall, while short-term pressure from overseas education budget fluctuations persists, the long-term core logic of improving global education digitalization penetration rates remains unchanged.