2025-06-17-花旗集团-掌趣科技（300315）_掌趣科技（300315.SZ）2025年第一季度业绩未达预期；模型更新；维持卖出_高风险评级_13页_549kb

Company Overview: Ourpalm is a smartphone game company founded in 2004 and listed in 2012, with key games including 大掌门 and 全民奇迹MU. Key mobile titles were acquired over time. The company focuses on expanding its game portfolio in casual and mid to hardcore genres.

Q1 2025 Financial Results: Revenues of Rmb162mn missed Citi's estimates, declining -37% year-over-year due to continued decline in mobile game revenues and limited contribution from new games. Net profit fell -50% yoy to Rmb28mn, exacerbated by lower gross profit margin (GPM) and reduced sales and marketing expenses.

Forward Guidance: Ourpalm plans to focus on publishing mini games domestically and strategy games overseas, including tests of Code: S and Code: H. However, performance for core games is expected to deteriorate without meaningful new game releases, leading to a tough outlook for 2025, with revenues projected to decline further.

Valuation Changes: Citi revised its financial estimates, cutting FY25E revenues to Rmb678mn and net profit to Rmb113mn, reflecting higher uncertainty. The target price was lowered from Rmb1.800 to Rmb1.500, based on a 6x revenue multiple of the FY26E estimate of Rmb690mn. The Sell/High Risk rating is maintained due to poor earnings visibility and regulatory risks.

Risks and Catalysts: Key risks include execution challenges in game development and stricter regulations, potentially leading to lower target price. Upside catalysts include stronger new game launches and closer collaboration with Tencent/Weixin. Expected share price return is negative, with a long-term decline forecast.