CITIC SEC: Maintains a "buy" rating on NetDragon (00777), AI cost reduction taking effect, focusing on long-term development

CITIC SEC has released a research report stating that it maintains a "buy" rating for NETDRAGON (00777) using a segmented valuation method, giving the company a valuation of HK$7.17 billion for 2026, corresponding to a target price of HK$13. The company focuses on shareholder returns, and the bank predicts that the company will maintain a HK$1 dividend per share in 2026, with a dividend yield of approximately 11%; the company also recently announced that its chairman of the board will increase his stake in the company in the next 12 months, demonstrating confidence in long-term development. The company has announced its financial results for 2025, with annual revenue/net profit attributable to owners of HK$4.48/1.5 billion, a gross profit margin of 70.3% for the year, up 5.1% year-on-year, and an operating profit of HK$280 million for the year, with a 47.7% increase in operating profit in the second half of the year. Mynd.AI business revenue is expected to see moderate recovery on the income side. The bank mentioned that the company's Mynd.AI business revenue was HK$1.2 billion, with a gross profit margin of 25.0% and overall opex expenses down 21% year-on-year. With the gradual recovery of the overseas education and large screen market and further expense control by the company, the OPM of the company's Mynd.AI business is expected to continue to improve. Previously, NETDRAGON reached a cooperation agreement with ByteDance to accelerate the transformation of AIGC creative enterprises. On January 27, NETDRAGON signed an AI ecology and joint innovation cooperation framework agreement with Volcano Engine, a cloud and AI service platform under ByteDance, to jointly build a deep cooperation barrier of technology + resources + ecology, scale production of the next generation of AIGC education resources, and create a globally co-creative and sharing innovative education ecology. The comprehensive strategic capabilities of NETDRAGON in the fields of education, cultural creativity, and games in AIGC are combined with the cutting-edge technological infrastructure of Volcano Engine, which is expected to further transform towards AIGC creative enterprises, with the potential for improved profit quality and growth.