Today (5 August), XD Inc. (02400.HK) released a profit alert that far exceeded market expectations, sparking a surge across Hong Kong–listed gaming stocks. Mobile-game names rallied intraday: XD jumped more than 24%, IGG gained nearly 10%, while CMGE and CMON both advanced, driving a sharp uptick in sector turnover.

XD Inc. Earnings Highlights

Last night, XD issued a positive profit alert, projecting 1H 2025 revenue of no less than RMB 3.05 billion, up about 37% YoY, and net profit of no less than RMB 790 million, soaring roughly 215% YoY. The leap in profit was driven by a dual engine of self-developed and licensed titles: the thriving performance of “Ragnarok M: Eternal Love (Classic)”, TapTap’s advertising business, and a string of new releases boosted gross margin and operating leverage. The iterative success of multiple hit titles has led the market to reassess XD’s earnings elasticity under its twin drivers of product pipeline and community traffic.

Share-Price Action and Sector Rotation

Fueled by the profit alert, XD’s shares opened higher and kept climbing, touching HK$ 70.25 at one point—a near four-year high—adding over HK$ 9 billion in market cap in a single session.

Bullish sentiment quickly spilled over to second- and third-tier names. IGG surged almost 10% intraday, CMON and CMGE each rose more than 6%, and other peers such as NetDragon and Feiyu Technology also followed suit, forming a classic “leader-driven, capital-chasing” sector rotation. CMON had already issued a turnaround alert, guiding 1H net profit of RMB 20–50 million and operating cash inflow of RMB 30–60 million, laying fundamental groundwork for the current rebound.

Policy Tailwinds and Market Demand

The policy backdrop remains supportive. In July, the National Press and Publication Administration approved 134 game licenses (127 domestic, seven imported), maintaining a robust approval pace for several consecutive months and bolstering confidence that regulation has normalized. Demand is also strengthening. The recently concluded ChinaJoy 2025 drew a record 410,300 visitors over four days; numerous publishers unveiled new titles and IP collaborations during the show, underscoring the seasonal uptick in traffic ahead of the summer holiday peak.

Industry data show China’s domestic game market generated RMB 168 billion in sales revenue in 1H 2025, up 14.08% YoY, with a user base of nearly 679 million—both record highs. Self-developed games remain the primary growth engine.

Broker Views and Risk Watchpoints

In June, CICC raised its target price for XD to HK$ 55.5 and maintained an “outperform” rating; the implied 19/17× P/E for FY 2025/26 was quickly absorbed by the market. Against the backdrop of earnings elasticity and external catalysts, many brokers are reassessing valuation anchors for gaming stocks, arguing the sector is entering a “fundamental recovery + policy-friendly” double-whammy window.

Near-term focus lies on new-game launch schedules, continuity of license approvals, and summer-season monetization; over the medium to long term, investors should monitor rising R&D costs, overseas-publishing uncertainties, and regulation of AI-generated content. Selecting companies with strong self-development capabilities, solid cash flows, and well-established global footprints remains key to capturing this valuation-re-rating cycle.