Key Points Industry and Company 1. **Company Overview**: The company has been in the social entertainment industry for over a decade, focusing on the Middle East and North Africa (MENA) region. [doc id='1'] 2. **Business Segments**: The company operates in two main segments: general population social networking and diverse population social networking. [doc id='2'] 3. **Product Portfolio**: The company has a diverse product portfolio, including TopTop, Sugo, and PC. [doc id='2'] 4. **Market Presence**: The company's products are available in over 70 countries globally. [doc id='2'] 5. **Revenue Growth**: The company's general population social networking segment achieved a revenue growth of over 35% in the first half of the year. [doc id='3'] 6. **Game Business**: The company has a growing game business with products like Xtreme and Telesequence. [doc id='9'] 7. **Shareholder Repurchase**: The company has repurchased over 90 million shares, totaling over 200 million USD. [doc id='9'] 8. **Acquisition Strategy**: The company is actively looking for acquisition opportunities in the social networking domain to expand its product portfolio. [doc id='10'] 9. **Market Outlook**: The company believes the social entertainment market in the MENA region has significant potential with a projected growth rate of over 20% in the next five years. [doc id='12] Core Views and Arguments 1. **Strong Growth in Key Products**: The company's TopTop and Sugo products have experienced explosive growth, with Sugo's user growth doubling in the first half of the year. [doc id='6'] 2. **Product Differentiation**: TopTop and Sugo differ from Yara Ludo in their focus on social networking as a core element, with a global product strategy. [doc id='7'] 3. **Game Business Profitability**: The company's game business, particularly Xtreme, is expected to achieve profitability in the fourth quarter of the year. [doc id='8'] 4. **Acquisition Strategy**: The company aims to acquire social networking companies with synergistic value to expand its product portfolio. [doc id='10'] 5. **Market Leadership**: The company aims to become a leader in each vertical market it operates in, with Sugo being a global leader in its category. [doc id='12] Other Important Content 1. **Product Pipeline**: The company plans to launch a new synthetic game next year to enrich its product portfolio. [doc id='9'] 2. **Blue City Brothers**: The company holds approximately 78% of Blue City Brothers, with the remaining shares held by founders and original PE investors. [doc id='10'] 3. **Market Share and Penetration**: The company aims to increase its market share in the MENA region, targeting a 20% growth rate in the overseas market for Blue City Brothers. [doc id='12]

Key Points Company Overview - **Industry**: Entertainment and social media - **Company**: Zhisheng Technology - **Leaders**: Gloria and Naomi - **Market**: Global, with a strong presence in Middle East and Southeast Asia Financial Highlights - **Revenue Guidance**: Approximately 4.5 billion RMB for the year - **Q3 Revenue Growth**: Strong growth, driven by social media business and gaming revenue - **Social Media Business**: TopTop and Sugo products experiencing rapid growth, contributing significantly to revenue - **Gaming Business**: iLive Stream achieving near one million USD in monthly revenue, expected to turn profitable in Q4 Social Media Business - **Revenue Contribution**: Approximately 90% of total revenue - **Growth Rate**: 35% year-on-year growth - **TopTop and Sugo**: Continued strong growth, with a significant impact on overall revenue - **PC Team**: Ongoing integration and brand building efforts in overseas markets, aiming for a healthy growth rate of around 20% Gaming Business - **iLive Stream**: Achieved near one million USD in monthly revenue in May, expected to turn profitable in Q4 - **Product Lifecycle**: Aim to maintain a long lifecycle of at least three to five years, with potential for even longer - **New Games**: Plans to develop more products in the same genre to strengthen the market position Marketing and Acquisition - **Buy-Volume Costs**: Increasing costs, but internal strategies to control costs and optimize ROI - **Buy-Volume Platforms**: Utilizing multiple platforms, including Apple, Facebook, and Google, with varying ROI and efficiency - **Acquisition Plans**: Actively seeking external growth opportunities, with several potential deals in discussion Shareholder Returns - **Share Repurchase**: Completed nearly 180 million HKD in share repurchases, demonstrating confidence in the company's fundamentals - **Dividend Policy**: Discussing a formal dividend policy, but no specific timeline provided Market Outlook - **Q4 and 2025**: TopTop and Sugo expected to maintain strong growth, with a focus on overseas market expansion - **Innovation Business**: Aim to achieve break-even or slight profitability in 2025 Other Key Points - **Employee Count**: Approximately 1,200 employees, with a significant presence in Egypt and other Middle Eastern and Southeast Asian countries - **Market Expansion**: Plans to expand into new markets, including Japan, South Korea, Europe, and other regions - **Policy Risks**: Monitoring regulatory changes and potential policy risks in different countries - **New Industry Expansion**: Focused on entertainment and social media, with plans to continue expanding within these areas

Company and Industry Summary Company Overview - The company is a leading global social entertainment firm established in 2009, with over a decade of experience in international expansion since 2013 [3] - The company operates two main business segments: social business and innovative business, with social business accounting for approximately 90% of total revenue [3] Financial Performance - For the first three quarters of 2024, the company reported revenue exceeding 3.5 billion RMB, with social business revenue growing over 60% year-on-year [1] - Innovative business revenue for the same period was approximately 300 to 320 million RMB, reflecting a year-on-year growth of 12.4% to 19.9% [2] - The company's overall revenue growth for the previous year was 18%, with a significant increase in gross profit margin by 14% [11] Social Business Highlights - The social business segment includes two categories: semi-group social and multi-group social, with products like Miko, Yoho, Popo, and Sugo [3] - The semi-group social business is primarily focused on the Middle East and North Africa (MENA) region, which contributes over 50% of social business revenue [2] - The SOHO platform has emerged as the highest revenue-generating social product, following Miko, achieving a monthly revenue of over 10 million USD [1] Market Dynamics - The MENA region is projected to exceed 2.36 billion USD by 2028, with an annual growth rate of over 20% from 2023 to 2028 [5] - The LGBTQ social business segment, acquired through the purchase of BlueCity, has become the second-largest globally, with a user base exceeding 7.43 million MAU [7] Innovative Business Insights - The innovative business focuses on premium games and advertising, with a notable entry into the casual mobile game market [8] - The flagship game, Alice Dream, has achieved a monthly revenue of nearly 10 million USD, ranking among the top 30 Chinese mobile games in overseas revenue [9] - Overall game revenue reached 576 million RMB, with a year-on-year growth of 82.5% [9] Strategic Initiatives - The company aims to cultivate multiple flagship products with monthly revenues exceeding 10 million USD over the next three years [10] - Plans to enhance the commercial capabilities of Alice and introduce new products are in place, with a target for Alice to break even by Q4 2024 [11] - The company is actively repurchasing shares, having bought back approximately 26 million shares for nearly 80 million HKD, reflecting management's confidence in the company's future [13] Future Outlook - The company projects a revenue target of 4.5 billion RMB for 2024 [13] - Continued focus on expanding overseas operations, particularly in Southeast Asia, is planned, with a goal to establish a strong brand presence [10] - The company is also exploring strategic acquisitions to enhance its market position [10] Additional Notes - The company has made significant organizational changes post-acquisition of BlueCity to improve profitability and streamline operations [14] - The acquisition of Miko World is progressing, with expectations to complete the transaction by late Q4 2024 [15]

Investment Rating - The report maintains a "Buy" rating for Chizicheng Technology (09911 HK) [1] Core Views - Chizicheng Technology's Q3 2024 revenue slightly exceeded expectations, with social business maintaining high-quality growth [1] - The company's social business revenue for Q1-Q3 2024 is expected to reach RMB 3 24-3 28 billion, a year-on-year increase of 60 7%-62 7% [1] - The company's innovative business revenue for Q1-Q3 2024 is expected to be RMB 300-320 million, a year-on-year increase of 12 4%-19 9% [1] - The company's self-developed and externally distributed premium game achieved a turnover of approximately RMB 576 million, a year-on-year increase of about 182 5%, but has not yet been reflected in the company's revenue [1] Financial Performance - The company's revenue for 2024E is expected to be RMB 4 773 billion, with a year-on-year growth rate of 44 3% [1] - The company's net profit attributable to the parent company for 2024E is expected to be RMB 383 million, a year-on-year decrease of 25 2% [1] - The company's ROE for 2024E is expected to be 25 5% [1] - The company's EPS for 2024E is expected to be RMB 0 32 [1] - The company's P/E ratio for 2024E is expected to be 10 3x [1] Social Business - The company's social business revenue for Q1-Q3 2024 is expected to reach RMB 3 24-3 28 billion, a year-on-year increase of 60 7%-62 7% [2] - The company's social business revenue for Q3 2024 is expected to be RMB 1 17-1 21 billion, a significant increase compared to the same period last year [2] - The company's social business growth is driven by the expansion of the pan-population social business in the Middle East and North Africa, with the SUGO platform achieving a monthly turnover of over USD 10 million [2] - The company's acquisition of BlueCity in August 2023 has contributed to the growth of social business revenue [2] - The company's new products, such as SUGO, TopTop, and HeeSay, are expected to contribute to the growth of social business revenue [2] Innovative Business - The company's innovative business revenue for Q1-Q3 2024 is expected to be RMB 300-320 million, a year-on-year increase of 12 4%-19 9% [5] - The growth of innovative business is driven by the steady development of social e-commerce business [5] - The company's flagship game, "Alice's Dream: Merge Games," achieved a turnover of approximately RMB 576 million, a year-on-year increase of about 182 5% [5] Acquisition of NBT Minority Stake - The company plans to acquire a minority stake in its subsidiary NBT Social Networking [3] - NBT's net profit after tax for 2022, 2023, and Q1 2024 were RMB 440 million, RMB 660 million, and RMB 170 million, respectively [3] - The acquisition is expected to be completed by the end of 2024 and will increase the company's net profit attributable to the parent company [3] Investment Recommendation - The report recommends maintaining a "Buy" rating for Chizicheng Technology [5] - The report expects the company's revenue for 2024-2026 to be RMB 4 773 billion, RMB 5 395 billion, and RMB 6 028 billion, respectively [5] - The report expects the company's net profit attributable to the parent company for 2024-2026 to be RMB 383 million, RMB 729 million, and RMB 844 million, respectively [5] - The report expects the company's P/E ratio for 2024-2026 to be 10 3x, 6 4x, and 5 5x, respectively [5]

Investment Rating - The report maintains a "Buy" rating for the company [1] Core Insights - The company has shown rapid growth in its social and gaming product revenues, with a projected revenue increase of 60.7% to 62.7% year-on-year for its social business in the first nine months of 2024 [2][3] - The innovative business segment is expected to generate revenue of 300 to 320 million RMB, reflecting a year-on-year growth of 12.4% to 19.9% [3] - The independently developed premium games have achieved a revenue of approximately 580 million RMB, marking a significant year-on-year increase of about 182.5% [3] Summary by Sections Revenue and Profit Forecast - Total revenue for 2024 is projected at 4,818 million RMB, with a year-on-year growth of 45.65% [1] - Net profit attributable to shareholders is forecasted at 406.7 million RMB for 2024, a decrease of 20.70% compared to the previous year [1] - The earnings per share (EPS) for 2024 is estimated at 0.29 RMB, with a price-to-earnings (P/E) ratio of 11.62 [1] Social Business Performance - The social business continues to grow rapidly, with the SUGO platform becoming the second social product to achieve monthly revenue exceeding 10 million USD [2] - As of September 30, 2024, the cumulative download of social business applications reached approximately 740 million, a 6.5% increase from June 30, 2024 [2] - The average monthly active users for the social business in Q3 2024 were approximately 28.98 million, reflecting a quarter-on-quarter growth of about 1.5% [2] Innovative Business and Gaming - The innovative business segment's revenue is expected to grow due to the steady development of social e-commerce [3] - The flagship game "Alice's Dream" has rapidly developed and entered the top 30 of Sensor Tower's overseas revenue rankings for Chinese mobile games [3] - The report indicates an upward revision of net profit forecasts for 2024 and 2025 due to better-than-expected performance in social business and gaming revenue [3]

Investment Rating - The report assigns a "BUY" rating to Newborn Town (09911.HK) with a target price of HK$ 3.80, an increase from the previous target price of HK$ 3.31 [2]. Core Insights - Newborn Town reported a year-on-year revenue increase of 65.3% to RMB 2,271.9 million for the half year ended June 30, 2024, with RMB 2,070.4 million coming from the social networking business [2]. - The performance of Sugo and TopTop was highlighted as resilient, contributing over 30% to total revenue, driven by strong performance in the MENA market [2]. - The report anticipates more than 1x growth for TopTop and Sugo in FY 2024, projecting over 50% year-on-year growth for the social networking business [2]. - Mico's performance was stable, accounting for over 40% of revenue from the social networking business, with operational optimization strategies leading to improved results [2]. - The acquisition of a non-wholly owned subsidiary that owns social entertainment products is expected to enhance profits attributable to shareholders [2]. - The innovative business segment saw a year-on-year growth of 53.7%, with one-third of this growth attributed to IAA games [2]. Financial Summary - Revenue projections for the upcoming years are as follows: RMB 3,307.8 million in 2024, RMB 4,401.4 million in 2025, RMB 5,281.1 million in 2026, and RMB 5,573.5 million in 2027, reflecting a year-on-year growth of 33.1% in 2024 [9]. - Gross profit is expected to increase from RMB 1,722.1 million in 2023 to RMB 2,203.5 million in 2024, with a gross margin of 52.1% [9]. - Net profit attributable to shareholders is projected to rise from RMB 512.8 million in 2023 to RMB 803.7 million in 2025 [9]. - The report indicates a significant increase in cash flow from operations, with projections of RMB 753.5 million in 2025 and RMB 831.3 million in 2026 [12]. Market Comparison - Newborn Town's market capitalization is approximately HKD 4.1 billion, with a P/E ratio of 6.4 and a gross margin of 52.1% [5]. - Compared to peers in the gaming and social networking sectors, Newborn Town's performance metrics indicate competitive positioning [5].

Investment Rating - The report assigns a "Buy" rating to the company with a target price of HK$ 3.80, up from a previous target of HK$ 3.31 [1]. Core Insights - The company achieved total revenue of RMB 2.27 billion in the first half of 2024, representing a year-on-year growth of 65.3%, with approximately RMB 2.07 billion coming from social business [1]. - Strong performance from Sugo and TopTop, driven by robust results in the MENA region, contributed over 30% of the group's revenue and remains a key growth driver [1]. - Sugo is expected to achieve over 100% revenue growth in the fiscal year 2024, contributing to more than 50% year-on-year growth in the group's social business [1]. - Mico World showed ideal performance, with Mico accounting for over 40% of the group's social business revenue, benefiting from optimized operational and commercialization strategies [1]. - The company announced the acquisition of non-wholly owned subsidiaries holding Mico and YoHo, which is expected to enhance profits attributable to shareholders [1]. Financial Summary - Total revenue projections for the company are as follows: RMB 3,307.8 million (2023), RMB 4,401.4 million (2024E), RMB 5,281.1 million (2025E), and RMB 5,573.5 million (2026E), with year-on-year growth rates of 18.1%, 33.1%, 20.0%, and 5.5% respectively [8]. - The gross margin is projected to be 52.1% in 2023, decreasing slightly to 49.6% by 2026 [8]. - Net profit attributable to shareholders is expected to rise from RMB 512.8 million in 2023 to RMB 806.1 million in 2026 [8]. - The company’s operating cash flow is projected to increase from RMB 753.5 million in 2024E to RMB 961.6 million in 2026E [13]. Market Comparison - The company’s market capitalization and financial ratios are compared with peers, showing a market capitalization of HK$ 4.1 billion and a price-to-earnings ratio of 6.4 [3].

Investment Rating - The report maintains an "Add" rating for the company with a target price of 4.08 HKD, based on a 12x PE for FY2024, corresponding to a market value of 48.6 billion RMB [1][2]. Core Insights - The company reported impressive performance for the first half of 2024, with total revenue reaching 2.272 billion RMB, a year-on-year increase of approximately 65%, and net profit of 388 million RMB, up 28% year-on-year. Adjusted EBITDA was 448 million RMB, reflecting a 29% growth [1]. - The growth was primarily driven by the company's expansion in the Middle East, North Africa, and other markets. The social business segment saw revenue of approximately 2.070 billion RMB, a 67% increase year-on-year, while the innovative business segment generated 202 million RMB, a 54% increase [1]. - The acquisition of a minority stake in NBT Social Networking is expected to enhance the company's net profit attributable to shareholders, as NBT will become a wholly-owned subsidiary, with its financial performance consolidated into the company's financial statements [1][2]. - The company has been included in the FTSE Global Small Cap Index and the FTSE All-World Index, which is anticipated to increase its visibility and influence in international capital markets [1]. Summary by Sections Performance Overview - In H1 2024, the company achieved total revenue of 2.272 billion RMB, a 65% increase year-on-year, and net profit of 388 million RMB, up 28% [1]. - The social business segment's revenue grew by 67% year-on-year, while the innovative business segment's revenue increased by 54% [1]. Acquisition Impact - The acquisition of NBT Social Networking is valued at approximately 1.98 billion HKD, and is expected to significantly boost the company's net profit post-acquisition [1][2]. Market Positioning - The inclusion in FTSE indices is expected to enhance the company's profile and attract global investment [1].

Financial Performance - For the six months ended June 30, 2024, customer contract revenue was RMB 2,271.9 million, an increase of 65.3% compared to RMB 1,374.6 million for the same period in 2023[4]. - Gross profit for the same period was RMB 1,141.0 million, up 61.4% from RMB 706.9 million in the prior year[4]. - Profit for the period reached RMB 387.6 million, representing a 28.2% increase from RMB 302.3 million in the previous year[4]. - Profit attributable to equity shareholders was RMB 224.7 million, a rise of 21.3% compared to RMB 185.3 million for the same period in 2023[4]. - Adjusted EBITDA for the six months was RMB 448.5 million, an increase of 29.2% from RMB 347.0 million in the prior year[4]. - Basic earnings per share for the period were RMB 0.20, compared to RMB 0.16 in the same period last year[5]. - The company reported a total operating profit of RMB 366.6 million, up from RMB 277.5 million in the previous year[5]. - Net profit for the same period was RMB 388 million, an increase of 28% year-on-year[12]. - The gross profit margin decreased from 51.4% for the six months ended June 30, 2023, to 50.2% for the same period in 2024[31]. Revenue Breakdown - Total revenue for the first half of 2024 reached RMB 2.272 billion, representing a year-on-year growth of 65%[12]. - Revenue from the social business segment was RMB 2.070 billion, with a year-on-year growth of 67%[12]. - The innovative business segment generated revenue of RMB 202 million, marking a 54% increase year-on-year[12]. - The flagship games segment generated a total revenue of RMB 387 million, reflecting a remarkable year-on-year growth of 393%[17]. - The core product (Mico World) in the MENA region saw a business scale increase of approximately 44% year-on-year[12]. Cost and Expenses - The company's cost of revenue for the six months ended June 30, 2024, was RMB 1,130.9 million, reflecting a 69.4% increase from RMB 667.7 million in the same period last year[25]. - The cost of revenue for the social business was RMB 1,046.1 million, a 61.1% increase from RMB 649.5 million year-on-year, mainly due to increased share of revenue to streamers and employee benefits[26]. - Sales and marketing expenses increased by 95.3% to RMB 481.6 million for the six months ended June 30, 2024, compared to RMB 246.6 million for the same period in 2023[32]. - Research and development expenses rose by 20.1% to RMB 163.9 million for the six months ended June 30, 2024, from RMB 136.5 million for the same period in 2023[33]. Cash Flow and Assets - Operating cash flow reached RMB 359 million, showing a significant increase of 103% year-on-year[12]. - Total assets increased from RMB 2,790.9 million as of December 31, 2023, to RMB 2,999.1 million as of June 30, 2024[43]. - Cash and cash equivalents rose to RMB 1,489.2 million as of June 30, 2024, up from RMB 1,386.3 million as of December 31, 2023[44]. - Operating cash flow increased to RMB 370.7 million for the six months ended June 30, 2024, compared to RMB 181.9 million for the same period in 2023[44]. Shareholder Information - The company has granted a total of 80,000,000 share options to 32 eligible individuals, with performance-linked vesting conditions[8]. - Mr. Liu Chunhe holds 238,706,646 shares, representing 20.04% of the total shares[57]. - Mr. Li Ping owns 73,121,774 shares, accounting for 6.14% of the total shares[60]. - The total number of issued shares as of the last practicable date is 1,191,216,000[61]. Strategic Initiatives - The company is focusing on expanding its MICO social business segment[9]. - The company plans to continue its "Middle East incubation, global replication" strategy, focusing on the MENA market to optimize products and services[19]. - The company aims to launch the HeeSay online community in 2024, targeting the global LGBTQ+ audience and enhancing brand influence through online and offline activities[20]. - The company plans to pursue strategic investments or acquisitions to create synergies within its business, focusing on companies with competitive advantages in technology and data[49]. Corporate Governance - The company has complied with the principles and provisions of the corporate governance code during the reporting period[124]. - The board has resolved not to declare an interim dividend for the six months ended June 30, 2024[126]. Acquisitions - The company signed a share purchase agreement to acquire NBT Social Networking Inc. for a total consideration of HKD 1,982,658,000 (approximately RMB 1,809,572,000), which includes cash consideration of HKD 993,790,000 (approximately RMB 907,032,000) and share consideration of HKD 988,868,000 (approximately RMB 902,540,000)[127].

Investment Rating - The report maintains a "Buy" rating for the company [1] Core Insights - The company reported a revenue of RMB 2.27 billion for the first half of 2024, representing a year-on-year increase of 65.3%, with a net profit attributable to shareholders of RMB 220 million, up 21.3% year-on-year [1] - The acquisition of a minority stake in NBT is expected to enhance future net profit attributable to shareholders [1] - The company has seen rapid growth in both social and innovative business segments, with social business revenue increasing by 66.5% to RMB 2.07 billion in the first half of 2024 [1] Financial Performance Summary - Total revenue (in million RMB) for 2022A, 2023A, 2024E, 2025E, and 2026E is projected at 2800, 3308, 4586, 5090, and 5656 respectively, with year-on-year growth rates of 18.60%, 18.15%, 38.64%, 10.99%, and 11.11% [1] - Net profit attributable to shareholders (in million RMB) for the same periods is forecasted at 130.14, 512.85, 346.63, 701.21, and 800.32, with year-on-year growth rates of 145.46%, 294.09%, (32.41)%, 102.29%, and 14.13% [1] - The adjusted EBITDA for the first half of 2024 was RMB 450 million, reflecting a year-on-year increase of 29.2% [1] Business Growth Highlights - The company’s social business has achieved significant growth, with products like MICO, YoHo, SUGO, and TopTop entering the top 10 revenue rankings for social applications in the Middle East [1] - The innovative business segment also showed strong performance, with revenue growth of 53.7% to RMB 200 million in the first half of 2024 [1] - The acquisition of NBT is expected to integrate its financial performance into the company's consolidated financial statements, potentially boosting profitability [1]