Investor Notes - Phillip Securities (HK) Ltd

30 Jun, 2025 (Monday)

IGG(799)
Analysis：
IGG (799) is a globally renowned mobile game and application developer and operator with a vast customer base spanning over 200 countries and regions. It offers mobile games in 23 languages, boasting approximately 1.5 billion total game users and over 17 million monthly active users. Since 2013, the group has actively expanded beyond gaming, successfully building a proprietary traffic platform centered on app services, replicating its global user acquisition strengths from gaming to the app business. In 2024, the app business achieved 62 million monthly active users worldwide, generating approximately HK$1.1 billion in revenue, further solidifying the group's diversified strategy. The rapid growth of the app business not only established a traffic platform that advances alongside the gaming business but also strengthened the group's competitive moat in the increasingly competitive gaming industry.In gaming, the nine-year-old evergreen title Lords Mobile remains robust, contributing nearly HK$2.6 billion in revenue in 2024. Two newer titles launched in 2023, Doomsday: Last Survivors and Viking Rise, underwent two years of refinement and optimized operations, generating approximately HK$1 billion and HK$700 million in revenue, respectively, in 2024. Together, these two titles accounted for 30% of the group's revenue, forming a trio of flagship strategy games alongside Lords Mobile, creating a stable and balanced gaming revenue structure.The group continuously evolves to enhance player experiences, introducing innovative features such as player-hosted gameplay and alliance vaults in Doomsday: Last Survivors, and “team battle royale” and “trade route supremacy guild wars” in Viking Rise. It extends product lifecycles through gameplay integration and social interaction while leveraging AI to reduce development costs and improve user acquisition precision, maintaining competitiveness in a rapidly changing market. In 2025, the group plans to launch two major strategy games, Frozen War and the PSS project, along with a significant casual game, Tycoon Master. The app business will aim to further increase revenue and expand its platform development. (I do not hold the mentioned stock.)
Strategy：
Buy-in Price: $4.20, Target Price: $4.60, Cut Loss Price: $4.00

BOC AVIATION(2588)
Analysis：
The Company is a leading global aircraft leasing company and a subsidiary of Bank of China. Its long-term financial performance is excellent, with an average aircraft age lower than its peers and an average remaining lease term of 7.9 years. In 2024, the company achieved a revenue of 2.557 billion US dollars, a yoy increase of 3.90%. Achieve a net profit attributable to the parent company of 924 million US dollars, a yoy increase of 20.90%. ROE is 15.3%. Under the constraint of upstream supply, it is expected that there will be a significant increase in aircraft rental prices and aircraft values in the coming period, which will directly benefit the company; In addition, external financing costs are expected to decrease in the future, further helping the company to unleash profitability elasticity.
Strategy：
Buy-in Price: $64.20, Target Price: $72.80, Cut Loss Price: $60.00

Shuanghuan Driveline(002472.CH) - Accelerated Overseas Expansion and Diversified Product Portfolio Advance in Tandem

Company profile:

Shuanghuan Driveline specializes in the manufacturing of gear transmission products, with the gear business accounting for about 80% of the Company's total business. The Company has gradually shifted from traditional gear products to high-precision gears and parts. Its main products span gear products (gears for passenger vehicles, commercial vehicles, engineering machinery, motorcycles and electric tools), reducers and other products, which are mainly applied in the electric drive systems, gearboxes and axles of vehicles, as well as electric tools, rail transit, wind power, industrial robots and other sectors. The Company operates five production bases in Zhejiang, Jiangsu, Chongqing, Dalian and other places.

Investment Summary

Strong Performance in New Energy Business Drives Rapid Net Profit Growth

In 2024, the Company recorded revenue of RMB8,781 million (RMB, the same below), up 8.76% yoy; net profit attributable to the parent company amounted to RMB1,024 million, up 25.42% yoy; net profit attributable to the parent company excluding non-recurring items was RMB1,001 million, up 24.64% yoy. EPS was RMB1.22, with a dividend per share of RMB0.226, representing a dividend payout ratio of 18.5%.

In Q1 2025, the Company reported revenue of RMB2,065 million, down 0.47% yoy, mainly due to the contraction of the steel trading business. Excluding this impact, core business revenue grew 12.5% yoy; net profit attributable to the parent company reached RMB276 million, up 24.70% yoy; and net profit attributable to the parent company excluding non-recurring items was RMB269 million, up 28.27% yoy.

Among the various business segments, the new energy vehicle (NEV) gear business delivered standout performance. In 2024, this segment generated revenue of RMB3.37 billion, accounting for 38.38% of the Company's total revenue, up 51.21% yoy, showing a strong upward trend. In Q1 2025, this segment continued to grow at a pace exceeding that of downstream NEV sales, further increasing its share of total revenue and becoming a key driver of performance growth.

The traditional internal combustion engine (ICE) vehicle gear segment recorded revenue of RMB1,954 million in 2024, down 1.99% yoy. In Q1 2025, this segment remained stable, with a yoy decline of approximately 5%.

The intelligent actuator segment posted revenue growth of over 69% yoy in 2024 and maintained a similar growth rate in Q1 2025.

The commercial vehicle gear segment saw a revenue decline of 18.01% yoy in 2024, mainly due to a significant yoy decrease in H2 2023. However, Q1 2025 revenue data suggests a gradual recovery from the bottom, with revenue surpassing that of Q3 and Q4 2024, although still down on a yoy basis. The Company is intensifying efforts to expand its presence in the commercial vehicle market by actively targeting leading overseas clients and strategically investing in NEV e-drive gear products for commercial vehicles.

The construction machinery gear segment remained stable across all quarters of 2024 and Q1 2025, with revenue in Q1 2025 performing slightly better than that in Q3 and Q4 2024.

Improved Sales Structure Significantly Boosts Gross and Net Margins

The Company's gross margin increased from 22.24% in 2023 to 25.01% in 2024, up 2.8ppts yoy. In Q1 2025, gross margin further rose to 26.82%, up 4.17ppts yoy. This improvement was mainly due to a reduced share of low-margin steel trading and the scale effects of high value-added passenger vehicle gear business.

The Company maintained effective cost control and stable expense ratios: the period expense ratio stood at 10.59% in 2024, up 0.3ppt yoy, with selling/administration/R&D/financial expense ratios at 0.98%/3.99%/5.19%/0.43%, respectively, representing yoy changes of -0.03/-0.08/+0.44ppts/flat. In Q1 2025, the respective ratios were 1.0%/3.8%/5.4%/0.4%, up 0.06/0.1/0.6/-0.03ppts yoy, benefiting from ongoing cost reduction and efficiency enhancement measures, as well as scale effects. The Company will continue to implement such initiatives in the coming years, including smart manufacturing and big data systems. The rise in R&D expense ratio reflects sustained investment in innovation.

The Company's net profit margin reached 11.66% in 2024, up 1.55ppts yoy; and rose further to 13.37% in Q1 2025, up 2.7ppts yoy, indicating continued improvement in profitability.

Accelerated Overseas Expansion and Diversified Product Portfolio Advance in Tandem

In the high-profile NEV gear field, the Company had established an annual production capacity of 6,500 thousand sets for NEV transmission gear shafts by the end of 2024, with full capacity utilisation. The production base for NEV transmission components in Hungary is currently in the equipment commissioning phase, with capacity to be gradually released based on existing orders. As construction of the Hungary plant progresses, delivery lead times and logistics costs will be reduced, laying a solid foundation for further global market expansion.

Centred on gear technology, the Company continues to advance its diversified product layout. Looking ahead to the next two to three years, development across business segments includes: first, driven by growing sales of domestic B-class and above models, demand for high-precision, low-noise gear products is surging. As a leading player in China's NEV gear market, the Company is expected to further increase its market share by leveraging its technological advantages and optimising its sales structure. Additionally, the coaxial reducer gear (used in industrial robots) and intelligent actuator (used in robotic vacuum cleaners) segments offer vast market potential and are likely to become new growth drivers. Other segments, including commercial vehicles and construction machinery, are expected to remain generally stable over the next two years..

Investment Thesis

Shuanghuan Driveline is a pacesetter in the domestic automotive gear industry and robotic RV reducer industry. By leveraging its advantages in capacity, management, R&D and customer base, the Company has seized the opportunities for upgrading brought by gear outsourcing and high industry barriers as a result of the booming new energy vehicle industry. Looking forward, the Company is expected to continuously benefit from the boom of new energy passenger vehicles, expansion of the industrial chains of automatic gearboxes of commercial vehicles, and rapid development of robotic reducers and gears for daily use.

As for valuation, we expected diluted EPS of the Company to RMB 1.48/1.72/2.07 of 2025/2026/2027. And we accordingly gave the target price to RMB35 respectively 24/20/17x P/E for 2025/2026/2027. "Accumulate" rating. (Closing price as at 24 June)

Risk

Progress of new production line is below expectations

Electric vehicle sales fall short of expectations

Macroeconomic downturn affects product demand

Sharply rising raw material prices or sharply falling product prices

Financials

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Recommendation on 30-6-2025
Recommendation	Accumulate
Price on Recommendation Date	$ 31.270
Suggested purchase price	N/A
Target Price	$ 35.000

Writer Info

Zhang Jing
(Research Analyst)

Tel: (+86 21 51699400-103)

Email:
zhangjing@phillip.com.cn

Enquiry : 2277 6666 OR investornotes@phillip.com.hk
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