Cathay Pacific Haitong Securities released a research report saying that NetDragon (00777) has made key progress in its native AI transformation, organizational efficiency improvements have been realized, game repairs have stabilized, and Mynd.AI has drastically reduced losses. It was given a 26-year 13xPE, with a target price of HK$10.4, maintaining the “Overweight” rating.
Cathay Pacific Haitong Securities's main views are as follows:
Profit resilience is highlighted, and shareholder returns continue to be realized
NetDragon 26H1 achieved revenue of 2.09 billion yuan; gross profit margin of 69.9%, +0.4 pct year-on-year. The company deepened cost control and improved organizational efficiency. 26H1 achieved operating profit of 140 million yuan, +24.1% year over year; net profit to mother of 40 million yuan, +20.0% year over year. The Board approved an interim dividend of HK$0.50 per share and promised a total distribution amount of not less than HK$600 million for 12 months from March 26, 2026. As of the end of June, net cash and liquid investment reserves were close to $1.8 billion.
Game revenue recovery stabilizes, Meyu AI opens a new growth track
26H1's game and application services business revenue was 1.59 billion yuan, +3.1% month-on-month; gross profit margin was 83.3%; operating profit was 460 million yuan, +10.3% month-on-month. Among them, game business revenue was +2.3% month-on-month, and the operating resilience of the flagship Changqing IP was fully verified: Magic Domain IPMAU surpassed 3 million, +24.1%/+15.8%, driving revenue +3.7% month-on-month; Conquest IP overseas revenue (dollar caliber) and Heroic Blade IP mobile game revenue were +19.3%/+4.4%, and +6.5%/+2.3% month-on-month, respectively. “Game+Cultural Tourism” continues to deepen its development. The AI employee matrix improved the efficiency of the entire R&D, operation and maintenance link, and the AI employee workload increased to 35-40%. In the field of application services, Muyu AI was officially released and global testing was launched, focusing on content creation and education scenario system optimization; the Hong Kong subsidiary Chuangsi and Zhongke Wenge deepened strategic cooperation, expanded the Hong Kong and Macao enterprise-level AI markets, and jointly built a major scientific research model, the Longgong international version of the enterprise-level security agent platform.
Mynd.AI's operational transformation has achieved remarkable results, and losses have narrowed drastically
26H1Mynd.ai's revenue was 510 million yuan; gross profit margin was 27.7%, +2.3 pct; operating expenses were 250 million yuan, -29.6% year over year; net loss was 160 million yuan, a sharp decrease of 30.8% year over year; adjusted EBITDA loss was 60 million yuan, an improvement of 53.7% year on year. The revenue structure continues to be optimized, service and SaaS revenue increased year-on-year, and recurring revenue momentum increased.