Financial Performance - Customer contract revenue for the six months ended June 30, 2024, was RMB 2,271.9 million, an increase of 65.3% compared to RMB 1,374.6 million for the same period in 2023[2] - Gross profit for the six months ended June 30, 2024, was RMB 1,141.0 million, up 61.4% from RMB 706.9 million for the same period in 2023[2] - Net profit for the six months ended June 30, 2024, was RMB 387.6 million, an increase of 28.2% compared to RMB 302.3 million for the same period in 2023[2] - Profit attributable to equity shareholders for the six months ended June 30, 2024, was RMB 224.7 million, up 21.3% from RMB 185.3 million for the same period in 2023[2] - Adjusted EBITDA for the six months ended June 30, 2024, was RMB 448.5 million, an increase of 29.2% compared to RMB 347.0 million for the same period in 2023[2] - Operating profit increased by 32.1% to RMB 366.6 million for the six months ended June 30, 2024, from RMB 277.5 million for the same period in 2023[24] - The company reported a basic earnings per share of RMB 0.20 for the six months ended June 30, 2024, up from RMB 0.16 in the same period of 2023, representing a growth of 25%[45] Revenue Growth - In the first half of 2024, the company's total revenue reached RMB 2.272 billion, a year-on-year increase of approximately 65%[6] - The company's social business generated revenue of RMB 2.070 billion, up 67% year-on-year, while innovative business revenue reached RMB 202 million, growing 54% year-on-year[6] - Revenue from core products, specifically the "Mico World" product, grew over 100% year-on-year[5] - Revenue from the MENA region grew approximately 44%[5] - Revenue from the SUGO product increased over 250%, with monthly revenue exceeding USD 10 million[5] - Social business revenue reached RMB 2,070.4 million, up 66.5% from RMB 1,243.5 million year-over-year, driven by optimized operations and the acquisition of Chizicheng Strategy Investment Limited[14] Cost and Expenses - Total revenue cost for the six months ended June 30, 2024, was RMB 1,130.9 million, a 69.4% increase from RMB 667.7 million in the same period of 2023[16] - The total expenses for the six months ended June 30, 2024, amounted to RMB 1,882,213,000, compared to RMB 1,134,234,000 for the same period in 2023, reflecting a significant increase in operational costs[59] - Sales and marketing expenses rose 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[21] - The innovative business's cost of revenue surged by 365.6% to RMB 84.8 million, primarily due to increased inventory costs and employee benefits related to social e-commerce expansion[18] Cash Flow and Liquidity - Operating cash inflow for the six months ended June 30, 2024, was RMB 359 million, a year-on-year increase of 103%[5] - Cash and cash equivalents at the end of the period were RMB 1,489 million, an increase of 7% compared to the beginning of the period[5] - Cash flow from operating activities increased to RMB 370,703 thousand for the six months ended June 30, 2024, up from RMB 181,862 thousand in the same period of 2023, reflecting improved operational efficiency[50] - The company’s cash and cash equivalents reached RMB 1,489,188 thousand as of June 30, 2024, compared to RMB 774,894 thousand a year earlier, indicating a strong liquidity position[50] Assets and Liabilities - 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, while total liabilities decreased from RMB 843.4 million to RMB 747.7 million[31] - The debt-to-asset ratio improved from 30.2% as of December 31, 2023, to 24.9% as of June 30, 2024[31] - Non-current liabilities decreased to RMB 125,901 thousand as of June 30, 2024, from RMB 146,951 thousand as of December 31, 2023, a reduction of 14.3%[47] - The company’s total liabilities as of June 30, 2024, were RMB 747,666 thousand, down from RMB 843,361 thousand at the end of 2023, indicating a decrease of 11.3%[47] Strategic Initiatives - The company plans to continue focusing on the Middle East and North Africa markets while expanding into Southeast Asia, Japan, South Korea, and North America[10] - The company plans to launch the Heesay online community for the LGBTQ+ demographic in 2024, aiming to enhance brand influence and market presence[12] - The company plans to engage in strategic investments or acquisitions to create synergies, focusing on companies with competitive advantages in technology and data[33] - The company aims to replicate successful products from the Middle East to global markets, leveraging its established user demand and business models[11] Market Outlook - The Middle East media and entertainment market is projected to reach USD 66.99 billion by 2029, indicating strong growth potential for the company[11] - The company expressed gratitude to management and employees for their efforts during the reporting period[68] - Forward-looking statements regarding business outlook and financial performance are based on existing data and assumptions, which may prove incorrect due to various risks and uncertainties[68] - The company emphasized that shareholders and potential investors should not overly rely on forward-looking statements due to inherent risks[68]

Investment Rating - Buy rating with a target price of HKD 4.59, representing a potential upside of 31.9% from the current price of HKD 3.60 [3][4] Core Views - The company is expected to see stable revenue growth in 2024 despite global macroeconomic slowdown, driven by its leading position in the social出海 sector [13] - The acquisition of a subsidiary is expected to significantly boost归母净利润 by fully consolidating the subsidiary's financial performance [9][23] - The company's LGBTQ+ social business,蓝城兄弟, is expected to continue improving profitability and contribute to revenue growth [10][12][26] Financial Performance - Revenue is projected to grow from HKD 2,800 million in 2022A to HKD 6,573 million in 2026E, with a CAGR of 23.05% [7][15] - Gross margin is expected to remain stable around 45% from 2024E to 2026E [7][14] - Net profit is forecasted to increase from HKD 287 million in 2022A to HKD 679 million in 2026E [7][15] - ROE is projected to improve from 18.8% in 2024E to 19.6% in 2026E [14] Business Operations - The company has established a diversified product portfolio including MICO, YoHo, SUGO, and TopTop, targeting emerging markets like the Middle East and Southeast Asia [13] - The acquisition of米可世界 is expected to enhance归母净利润 by eliminating minority interest deductions and improving EPS [23][25] - The company's LGBTQ+ social business is benefiting from the integration of赤子城科技's technological and market insights, leading to improved operational efficiency [12][26] Market Position - The company is a leading player in China's internet出海 sector, with a strong presence in social networking and entertainment services [13][23] - Its products serve over 150 countries and regions, with nearly 100 million users globally [25] - The company is well-positioned to capitalize on the growing LGBTQ+ market, which is projected to reach USD 5.4 trillion by 2023 [26]

作者 吴立 分析师 SAC 执业证书编号：S1110517010002 wuli1@tfzq.com 股价走势 -21% 12% 45% 78% 111% 144% 177% 2023-06 2023-10 2024-02 赤子城科技 恒生指数 资料来源：聚源数据 相关报告 投资建议 风险提示：1、海外市场监管政策风险 2、汇率波动风险 3、新业务不及 预期 4、市场拓展不及预期 5、收购进度不及预期 港股公司报告 | 公司点评 本报告署名分析师在此声明：我们具有中国证券业协会授予的证券投资咨询执业资格或相当的专业胜任能力，本报告所表述的 所有观点均准确地反映了我们对标的证券和发行人的个人看法。我们所得报酬的任何部分不曾与，不与，也将不会与本报告中 的具体投资建议或观点有直接或间接联系。 除非另有规定，本报告中的所有材料版权均属天风证券股份有限公司（已获中国证监会许可的证券投资咨询业务资格）及其附 属机构（以下统称"天风证券"）。未经天风证券事先书面授权，不得以任何方式修改、发送或者复制本报告及其所包含的材 料、内容。所有本报告中使用的商标、服务标识及标记均为天风证券的商标、服务标识及标记。 本报告是机密的， ...

声明本次电话会议仅服务于德邦证券研究所客户不构成投资建议相关人员应自主作出投资决策并自行承担投资风险德邦证券不对因使用本次内容所导致的任何损失承担任何责任 未经德邦证券事先书面许可任何机构或个人不得以任何形式复制刊载转载转发引用本次会议内容否则由此造成的一切后果及法律责任由该机构或个人承担本公司保留追究其法律责任的权利市场有风险投资需谨慎各位投资者大家下午好我是那个德邦证券传媒互联网海外的手机分析师马笑 那我们线上的策略会在那个特别荣幸邀请到赤子城的两位领导做一个这个分享我们就把时间交给那个公司领导首先就是做一个这个公司的介绍分享然后后面我们有一个这个互动交流的一个环节那把时间交给公司领导有请好的好的非常感谢德光证券帮我们安排这个交流的活动然后首先我让同事先给大家介绍一下公司以及最新的一些亮点和进展 好的首先我来介绍一下我们公司的一个基本情况我们公司是一家全球的社交娱乐公司然后我们从已经有十几年的一个出海经验然后我们公司的主要两大块业务第一块是社交业务然后社交业务其中分为泛人群社交和多人群社交然后泛人群社交的话主要是我们是有四款请问 各位领导现在可以看到PPT吗这个共享是不是没有共享我看现在这个屏幕上没有PP ...

Investment Rating - The report gives a "Buy" rating for the company with a target price of HKD 5.09, based on an 11x PE multiple for FY2024 [30][32] Core Views - The company has successfully expanded its social and gaming businesses globally, particularly in emerging markets like Southeast Asia, the Middle East, and North Africa [3][31] - Its diversified product matrix, including mass social, niche social, and innovative gaming products, has created a strong competitive moat [31][60] - Localized operations and strategic acquisitions have enhanced user stickiness and market penetration [3][31] Business Overview - The company's mass social products like MICO and YoHo have achieved leading positions in key markets such as the Middle East and Southeast Asia [60][86] - Niche social platforms like Blued and HeeSay cater to LGBTQ+ communities, with strong user retention rates exceeding 70% [81][113] - Innovative gaming products, especially Alice's Dream: Merge Island, have gained significant traction in Western markets [66][116] Financial Performance - FY2023 revenue reached RMB 3.31 billion, with a YoY growth of 18% [102][121] - Gross profit margin improved to 52% in FY2023, up 14 percentage points from the previous year [105][126] - The company's cash and cash equivalents increased by 132% YoY to RMB 1.39 billion in FY2023 [109][128] Market Opportunities - Emerging markets like Southeast Asia and the Middle East show strong potential for social and gaming growth due to younger demographics and increasing internet penetration [3][177] - The global mobile gaming market is recovering, with casual games expected to dominate, especially in Western markets [3][143] - Open social platforms are becoming a new blue ocean as traditional social networks reach saturation [140][150] Competitive Advantages - The company has built a strong moat through its mass social products and is expanding into niche social and gaming markets [31][60] - Localized operations and strategic acquisitions have enhanced its global presence and user engagement [3][31] - Its gaming products, particularly Alice's Dream: Merge Island, have achieved top rankings in key markets [66][116] Future Outlook - Revenue is expected to grow to RMB 4.12 billion, RMB 4.81 billion, and RMB 5.53 billion in FY2024, FY2025, and FY2026, respectively [155][157] - Gross profit margin is projected to increase to 54%, 55%, and 56% over the same period [156][157] - The company plans to continue expanding its social and gaming product matrix, focusing on emerging markets and casual games [155][166]

Summary of the Conference Call Company and Industry Involved - The conference call involved **Shazhi Company** and **Chizichen Technology** as a key participant in the discussion [1] Core Points and Arguments - The meeting was a **mid-term investment strategy meeting** organized by **Anxin International** and **Luyanzhong** [1] - **Wang Yang**, a TMT analyst from Anxin International, hosted the meeting, indicating a focus on technology, media, and telecommunications sectors [1] - **Gloria**, the managing director of Chizichen Technology, was present to provide insights into the company's dynamics and core values, suggesting a focus on understanding the company's strategic direction and market positioning [1] Other Important but Possibly Overlooked Content - The collaboration between **Anxin International** and **Luyanzhong** highlights a strategic partnership aimed at enhancing investment insights and opportunities in the technology sector [1] - The presence of a managing director in the meeting indicates the importance of leadership perspectives in understanding company performance and future strategies [1]

Summary of Conference Call Company and Industry Involved - The conference is focused on **Chizi Cheng Technology** and its dynamics within the **TMT (Technology, Media, and Telecommunications)** sector [1] Core Points and Arguments - The meeting is a **mid-term investment strategy** session organized by **Anxin International** and **Luyanzhong** [1] - **Wang Yang**, the TMT analyst from Anxin International, is hosting the conference [1] - **Gloria**, the managing director of Chizi Cheng Technology, is present to provide insights into the company's core values and dynamics [1] Other Important but Possibly Overlooked Content - The conference aims to enhance understanding of **Chizi Cheng Technology** for investors, indicating a focus on investor relations and transparency [1]

Summary of Conference Call Company and Industry - The conference call involved **ZhiZi City Technology** (赤子城科技) and was hosted by **Anxin International TMT Analyst Wang Yang** [1] Core Points and Arguments - The management of ZhiZi City Technology, represented by **Gloria**, was invited to discuss the company's dynamics and core values [1] Other Important Content - Investors were encouraged to submit questions during the call for further engagement and clarification [1]

Acquisition and Share Transactions - The company acquired 1,000,000 shares of Chizicheng Strategy Investment for $1.00, representing 100% of its issued share capital[10] - The company entered into a sale and purchase agreement with Spriver, a major shareholder, for the acquisition of Chizicheng Strategy Investment, constituting a connected transaction under the Listing Rules[12] - The company completed the acquisition of Chizicheng Strategy Investment, expanding its social business portfolio with products like Blued and Finka[151] - The company completed the acquisition of Chizicheng Strategy Investment in August 2023, merging BlueCity and Land of Glory's revenues to expand its diversified social business[188] Restricted Share Units (RSUs) and Incentive Plans - The restricted share units (RSUs) under the RSU incentive plan had a lock-up period of three years from the first unlocking date, which is within six months after the grant[3] - No RSUs were granted, canceled, or lapsed under the RSU incentive plan from its adoption date to December 31, 2023[7] - The company purchased shares representing approximately 1.60% of the total issued shares under the RSU incentive plan[9] Financial Performance and Metrics - The consolidated affiliated entities generated revenue of approximately RMB 707.9 million and a profit of RMB 198.2 million for the year ended December 31, 2023[22] - The total assets and liabilities of the consolidated affiliated entities were approximately RMB 2,134.2 million and RMB 504.4 million, respectively, as of December 31, 2023[22] - Total revenue reached approximately RMB 3.31 billion, a year-on-year increase of 18.1%[167] - Adjusted EBITDA reached RMB 674.6 million, a year-on-year increase of 80.0%[138][167] - Net profit attributable to the company's owners was approximately RMB 512.8 million, a year-on-year increase of 294.2%[167] - Social business revenue reached approximately RMB 3.0 billion, maintaining a leading position in markets such as the Middle East, North Africa, and Southeast Asia[167] - Innovative business revenue reached approximately RMB 336 million, a year-on-year increase of 38.6%[167] - Cash and cash equivalents at the end of the period were RMB 1.39 billion, a year-on-year increase of 132.0%[161] - Business scale in the Middle East and North Africa region grew by 30.0% year-on-year[161] - The company's total assets increased to RMB 2.79 billion, with total equity reaching RMB 1.95 billion[164] - Total revenue for the year ended December 31, 2023, was approximately RMB 3,307.8 million, an increase of 18.1% compared to RMB 2,799.7 million in 2022[188] - Social business revenue for 2023 was approximately RMB 2,971.9 million, up 16.2% from RMB 2,557.4 million in 2022, driven by growth in both pan-population and diversified social businesses[188] - Gross profit for 2023 was approximately RMB 1,722.1 million, a 62.8% increase from RMB 1,057.9 million in 2022, with social business gross profit rising to RMB 1,429.1 million from RMB 856.6 million[192] - The company's social business cost of revenue decreased by 9.3% to RMB 1,542.8 million in 2023, primarily due to improved commercialization efficiency and reduced host sharing costs[191] - Sales and marketing expenses increased by 42.2% to RMB 688.4 million in 2023, mainly due to increased promotion efforts for the social business[194] Contractual Arrangements and VIE Structure - The company's existing contractual arrangements include exclusive business cooperation agreements with Chizicheng Mobile Technology for software development, technical and market data consultation, and customer service[17] - The company's structural contracts ensure economic benefits flow from the consolidated affiliated entities to the group, with detailed diagrams illustrating the flow[16] - The company's exclusive equity call option agreement allows Shandong Chizicheng to purchase equity in Chizicheng Mobile Technology for RMB 1, subject to minimum purchase price regulations[18] - BlueCity and its affiliates have become consolidated entities of the group following the acquisition, with contractual arrangements allowing control over restricted or prohibited industries in China[44] - BlueCity Information Technology holds 100% ownership of intellectual property created under the Exclusive Consulting and Service Agreement, with further licensing negotiations planned[48] - Chinese equity holders (including Han De Hou Cheng and Chizi Network Technology) hold approximately 99.85% and 0.15% interests in the Variable Interest Entity (VIE), respectively[46] - The contractual arrangements enable the group to control and derive economic benefits from BlueCity entities without direct equity ownership[60] - Chinese equity holders are restricted from transferring or encumbering their equity in the VIE without prior written consent from BlueCity Information Technology[54] - The group's financial statements consolidate the performance of BlueCity entities as if they were wholly-owned subsidiaries[61] - The VIE structure places the group in a unique position regarding continuous connected transactions under listing rules, potentially increasing administrative costs[61] - The company operates mobile application development business in China through contractual arrangements with Chizicheng Mobile Technology and its subsidiaries, and provides internet and social networking services through BlueCity entities, but certain terms of the contractual arrangements may not be enforceable under Chinese law[66] - The company has taken measures to ensure the effective operation of contractual arrangements and compliance with them, including addressing potential conflicts of interest with Chinese equity holders[92] - The company's contractual arrangements are crucial to its legal structure and business operations, and transactions under these arrangements are conducted on fair and reasonable terms[84] Market and Business Strategy - The company's core business is global social entertainment, with its fastest-growing and most deeply developed segment being open social platforms, including MICO, YoHo, SUGO, and TopTop[102] - The company is actively exploring innovative business areas in social entertainment, including the development of premium games such as "Mergeland-Alice's Adventure"[102] - The Middle East and North Africa (MENA) media and entertainment market is projected to grow from $39.05 billion in 2023 to $61.23 billion by 2028, with the company being a leading player in the region[179] - The global diversified social market reached approximately $3.842 billion in 2023, with significant growth potential in Southeast Asia, Japan, South Korea, and欧美 regions[180] - The company plans to focus on localized operations and product innovation to expand its pan-population social product matrix and enhance its global social entertainment ecosystem[180] - The global casual gaming market is expected to grow at a CAGR of 9% from 2022 to 2027, reaching $25 billion by 2027, with the company continuing to develop high-quality games[183] - MICO's community activity and new user scale increased significantly through multiple upgrades and customized services for Middle Eastern users, leading to improved profitability[197] - YoHo enhanced content operations and localized gameplay for Middle Eastern users, improving user engagement and operational precision[197] - SUGO's monthly active users (MAU) increased by over 3 times year-over-year (YoY), with revenue and profit also growing by over 3 times YoY[197] - TopTop's product revenue grew by over 2 times YoY, and profit increased by over 6 times YoY, driven by an improved user growth system and increased community rewards[197] - The company's broad social business achieved high-quality growth, laying a solid foundation for expansion in the social entertainment sector[198] - The company plans to continue exploring global markets and user demands to launch more high-quality social products and become a leading platform in various segments[198] - HeeSay, a new online community targeting LGBTQ+ users, was officially launched in early 2024 to meet their needs for self-expression, life sharing, and entertainment[200] Intellectual Property and Trademarks - The group has applied for 28 trademarks in Hong Kong and monetized several apps through mobile advertising on Google Play and Apple App Store[59] - BlueCity Information Technology holds 100% ownership of intellectual property created under the Exclusive Consulting and Service Agreement, with further licensing negotiations planned[48] - The company has applied for 6 trademarks in Hong Kong through BlueCity Holdings Hong Kong Limited[83] - The company has registered trademarks in Hong Kong and operates app traffic monetization business there as part of its strategy to comply with regulatory restrictions on foreign ownership in China[83] Risks and Challenges - Risks include potential government penalties, less effective control compared to direct ownership, and additional tax scrutiny[63][64][65] - The group faces challenges in complying with foreign investment restrictions in China's telecommunications sector, requiring approval from regulatory authorities[57] - The company faces risks related to the interpretation and implementation of the Foreign Investment Law, which could impact its corporate structure, governance, and business operations[87] Corporate Governance and Board Structure - The company's board of directors consists of seven members, including four executive directors and three independent non-executive directors[110] Environmental and Social Responsibility - The company has implemented environmental protection measures and encouraged employees to save energy and reduce unnecessary waste[109] Customer and Supplier Concentration - The top five customers accounted for approximately 12.81% of the company's total revenue, with the largest customer contributing 8.81%[107] - The top five suppliers accounted for approximately 42.92% of the company's total procurement, with the largest supplier contributing 16.93%[107] Dividend Policy - The company did not recommend the distribution of a final dividend for the year ended December 31, 2023[105] Property, Plant, and Equipment - The company's property, plant, and equipment details for the year ended December 31, 2023, are provided in Note 16 of the consolidated financial statements[127] Game Development and Performance - The game "Alice's Dream: Merge Island" achieved significant growth in revenue and became a top product in the global Merge game category[153] Overseas Operations and Compliance - The company has accumulated overseas experience in operating value-added telecommunications services and has taken measures such as operating its own app traffic monetization business in Hong Kong through Solo X Technology[83]

Investment Rating - The report assigns a "Buy" rating to the company, with a target price of HK$ 3.31, down from a previous target of HK$ 3.73 [2][5]. Core Insights - The company reported revenues and net profit attributable to the parent company of RMB 3.31 billion and RMB 510 million, respectively, slightly exceeding expectations [2]. - Strong performance from applications like Sugo and TopTop offset the weak contribution from Mico, which saw a year-on-year decline of over 30% [2][5]. - The MENA market is identified as a key growth driver, with Sugo and TopTop revenues growing approximately 3x and 2x year-on-year [2]. - The company aims to develop two social applications with monthly revenues exceeding USD 10 million over the next three years [2]. Financial Summary - Total revenue projections for the upcoming years are as follows: RMB 3,307.8 million in 2023, RMB 4,190.7 million in 2024, RMB 4,542.0 million in 2025, and RMB 4,880.5 million in 2026, reflecting a year-on-year growth of 18.1% in 2023 and 26.7% in 2024 [9]. - Gross profit is expected to reach RMB 1,722.1 million in 2025, with a gross margin of 51.1% [9]. - Net profit projections are RMB 601.8 million in 2025, with a year-on-year growth of 3.7% [9]. Market Position and Competitors - The report highlights that Mico's performance remains weak, and new games and social applications have not yet achieved breakeven [17]. - The company is compared with peers in the gaming and social media sectors, indicating a competitive landscape [17].