The latest: Mobile game developer Qingci Games Inc. (6633.HK) said in a profit forecast on Thursday evening that its adjusted net profit for last year jumped between 150% to 165.1% from 2020 to between 415 million yuan ($65.2 million) and 440 million yuan.

Looking up: The increase was primarily attributable to its game “The Marvelous Snail,” which continued to record strong growth in 2021 after its launch in June 2020; and the success of “Lantern and Dungeon,” launched in March 2021.

Take Note: The company recorded a 745 million yuan loss last year from investment items unrelated to its core gaming business. The inclusion of those will significantly reduce its profit last year by more than 400% from the 166 million yuan in 2020, meaning the company will post a net loss for the year.

Digging Deeper: Founded in 2012 and listed in Hong Kong at the end of last year, Qingci Games operates six mobile games and has 10 more in its pipeline. The iconic “Marvelous Snail” currently accounts for most of the group’s revenue, but growth has slowed down and is being overtaken by the newer “Lantern and Dungeon” game. But the Chinese General Administration of Press and Publication has not announced any new game approvals since July last year. According to media reports citing industry sources, the ban on approval of new games may continue this year, which could have a significant impact on game developers like Qingci that need to continually push out new games to refresh their revenue streams.

Market Reaction: Qingci’s shares fell on Friday and closed down 3.7% at HK$5.60 at the midday break. The stock has been weak since its listing, with the latest share price already just about half of its listing price of HK$11.20.

Translation by Jony Ho

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