Investment Rating - The report gives a "Buy" rating for Chizicheng Technology (09911 HK) with a target PE of 11 0/8 9/7 5x for 2024-2026 [3] Core Views - Chizicheng Technology is a leader in the social出海赛道 with a diversified product matrix contributing to growth potential The flagship game maintains strong performance [3] - The company's social business profitability has significantly improved with a gross margin of 48 09% in 2023, up 14 58pct YoY [2] - Revenue is expected to reach 4 39/5 05/5 70 billion yuan in 2024-2026 with net profit of 449/558/665 million yuan [3] Business Overview - The company has a rich product matrix in the泛人群社交 sector including MICO YoHo SUGO and TopTop MICO and YoHo contribute to a stable base while SUGO and TopTop show strong growth potential [2] - The company adopts a "product replication" and "country replication" strategy leveraging its SoloCells中台研发系统 to reduce R&D and promotion costs [2] - The company has shifted its strategic focus from "scale" to "profit" leading to a significant improvement in profitability with a gross margin of 52 06% in 2023 up 14 27pct YoY [181] Financial Analysis - The company achieved a net profit of 513 million yuan in 2023 a YoY increase of 294% with a net profit margin of 15 50% up 10 86pct YoY [28] - Sales/R&D/administrative expenses in 2023 were 688/315/172 million yuan respectively up 42 2%/48 3%/53 8% YoY mainly due to increased marketing and employee benefits [16] - The company maintains robust operating cash flow with cash reserves of 1 388 billion yuan in 2023 [183] Market Potential - The global social media market is expected to grow at a CAGR of 15 1% from 2021 to 2024 with video and audio social markets growing at 27 6% and 25 8% respectively [34] - The MENA region has the highest social media usage rate with an average of 8 4 social media accounts per person spending at least 3 5 hours daily on these platforms [36] - Southeast Asia has a young population with high internet penetration rates exceeding the global average in countries like Malaysia Singapore and the Philippines [32] Product Strategy - The company has developed a multi-modal product matrix strategy to meet diverse social needs globally with products like MICO YoHo SUGO and TopTop [46] - MICO and YoHo provide a stable revenue base while SUGO and TopTop contribute to strong growth momentum [47] - The company launched HeeSay a多元人群社交 platform in 2024 leveraging the international version of Blued to target the LGBTQ+ market [61] Game Business - The company's flagship game "Alice's Dream Merge Island" achieved a monthly revenue of over 8 million USD in Q4 2023 and entered the top 10 puzzle game charts in 140 countries/regions on Google Play [22] - The global mobile gaming market is expected to reach 100 billion USD by 2028 with a CAGR of 6 8% from 2023 [108] - The company's game business is expected to achieve breakeven in 2024 with potential synergies between its social and gaming businesses [117] Management and Shareholding - The company's founder and chairman Liu Chunhe holds a 20 04% stake while CEO Li Ping holds a 6 14% stake The top five shareholders hold a stable stake structure [11] - The management team has rich experience in product development and operations with a keen insight into market changes [169] - The company has conducted multiple share buybacks and management share purchases demonstrating confidence in its development [19]

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]

Dear investors, good morning. Welcome to the Shazhi Company Exchange, a mid-term investment strategy meeting held jointly by Anxin International and Luyanzhong. I'm your host, Anxin International's TMT analyst, Wang Yang. We are honored to have Gloria, the managing director of Chizichen Technology, to join us in this meeting to help us understand the dynamic and core values of Chizichen Technology. If you have any questions, you can ask them in the Q&A section. I will read them out to you later. Gloria, the ...

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].

Investment Rating - The investment rating for Newborn Town (09911.HK) is "BUY" with a target price of HK$ 3.31, reduced from the previous target price of HK$ 3.78 [20][28]. Core Insights - Newborn Town reported a total revenue of RMB 3.3 billion and a profit attributable to shareholders of RMB 512.8 million, slightly exceeding estimates. The strong performance of apps like Sugo and TopTop in the MENA market contributed significantly, with revenue increases of approximately 3x and 2x year-on-year respectively. However, the app Mico experienced a significant decline of over 30% year-on-year, which was unexpected and negatively impacted overall performance [9][26][28]. - The company aims to develop two more flagship social networking apps with expected monthly revenues exceeding USD 10 million within three years, although details on these apps remain limited [9][28]. Financial Performance - Revenue projections for the upcoming years are as follows: RMB 4,190.7 million in 2024, RMB 4,542.0 million in 2025, and RMB 4,880.5 million in 2026, reflecting year-on-year growth rates of 26.7%, 8.4%, and 7.5% respectively [6][16]. - Gross margin has shown resilience, maintaining above 50%, with a reported gross margin of 52.1% for 2023, an increase of 14.3 percentage points from previous estimates [10][22]. - The net profit attributable to shareholders is projected to be RMB 449.5 million in 2024, RMB 472.1 million in 2025, and RMB 499.3 million in 2026, indicating a growth trajectory despite challenges [24][32]. Market Position and Competitors - Newborn Town's market capitalization is approximately HK$ 3.1 billion, with a current stock price of HK$ 1.85 [5][21]. - The company is positioned within a competitive landscape, with peers showing varied performance metrics, highlighting the challenges faced in replicating successful app performance [14][31].

Investment Rating - The investment rating for the company is "Buy" (maintained) [1] Core Insights - The company's social business revenue for 2023 grew by 16.2% year-on-year to RMB 2.97 billion, with a gross margin increase of 14.6 percentage points to 48.1%, driven by product upgrades and improved content quality [1] - The innovative business segment saw a revenue increase of 38.6% year-on-year to RMB 340 million, with a gross margin rise of 4.1 percentage points to 87.2%, attributed to the successful launch of new products like Sudoku games [1][2] - The company launched a hit game "Alice's Dream: Merge Island" in 2023, achieving high rankings in global charts and generating significant overseas revenue [2] - The social business strategy of "multiple products, multiple markets" has shown success, with several products entering top revenue rankings [12] Financial Summary - For 2023, the company reported total revenue of RMB 3.31 billion, an 18.1% increase year-on-year, with a net profit of RMB 512.85 million, reflecting a 294.2% year-on-year growth [11] - The forecast for net profit is adjusted to RMB 4.5 billion for 2024 and RMB 5.2 billion for 2025, with an expected net profit of RMB 6.0 billion in 2026 [13] - The current stock price corresponds to a price-to-earnings ratio (P/E) of 6 for 2024, 5 for 2025, and 4 for 2026, indicating strong growth potential [13]

Financial Performance - Revenue reached RMB 3.31 billion, representing an 18.1% year-over-year growth[3] - Adjusted EBITDA amounted to RMB 674.6 million, reflecting an 80.0% year-over-year increase[18] - The company reported a net profit of RMB 760.6 million for the year, compared to RMB 287.3 million in the previous year[14] - For the fiscal year ending December 31, 2023, total revenue was approximately RMB 3,307.8 million, an increase of about 18.1% compared to RMB 2,799.7 million for the fiscal year ending December 31, 2022[58] - Operating profit for the year ended December 31, 2023, was approximately RMB 551.1 million, an increase of about 104.6% from RMB 269.3 million in 2022[65] - Adjusted EBITDA for the year ended December 31, 2023, was RMB 674,638 thousand, compared to RMB 374,688 thousand in 2022[70] - The total comprehensive income for the year ended December 31, 2023, was RMB 734,551 thousand, compared to RMB 328,916 thousand in 2022, representing an increase of approximately 123%[136] - Basic earnings per share for the year ended December 31, 2023, were RMB 0.45, up from RMB 0.11 in 2022, indicating a significant growth of 309%[137] Revenue Breakdown - Social business revenue accounted for 89.8% of total revenue at RMB 2,971.9 million, up 16.2% from RMB 2,557.4 million in the previous year[40] - Innovative business revenue reached RMB 335.9 million, representing a growth of approximately 38.6% from RMB 242.3 million in the previous year[58] - The company's social business revenue for the year ended December 31, 2023, was approximately RMB 2,971.9 million, an increase of about 16.2% compared to RMB 2,557.4 million for the year ended December 31, 2022[133] - The company’s income from social business was RMB 2,854,467,000, up from RMB 2,535,943,000 in 2022, showing a growth of approximately 12.6%[175] Cost and Profitability - Gross profit for the fiscal year was approximately RMB 1,722.1 million, a significant increase of about 62.8% from RMB 1,057.9 million in the previous year[43] - Gross margin improved from approximately 37.8% in 2022 to approximately 52.1% in 2023, with social business gross margin increasing from approximately 33.5% to 48.1%[62] - Gross profit for the year was RMB 1,722,083,000, compared to RMB 1,429,096,000 in the previous year, indicating a gross profit margin improvement[173] Expenses and Investments - Research and development expenses increased by approximately 48.3% to RMB 314.5 million from RMB 212.1 million in the previous year[45] - General and administrative expenses increased to approximately RMB 172.0 million for the year ended December 31, 2023, from RMB 111.8 million in 2022, marking a 53.8% increase primarily due to higher employee benefits[89] - The company plans to pursue strategic investments or acquisitions to create synergies with its existing business, focusing on companies with competitive advantages in technology and data[48] Market Expansion and New Initiatives - The company completed the acquisition of Chizicheng Strategy Investment in August 2023, expanding its social business portfolio[24] - The new online community HeeSay targeting LGBTQ+ users is set to launch in early 2024[8] - The company plans to continue investing in the MENA market while expanding its presence in Southeast Asia, Japan, and North America[12] - The company aims to further explore the integration of gaming and social businesses to better meet user entertainment needs[38] - HeeSay aims to create a diverse and open online community, enhancing user interaction through various features like posts, live streaming, and voice rooms[82] Employee and Corporate Governance - As of December 31, 2023, the company had a total of 1,465 full-time employees, with approximately 50.24% in research and development[53] - The company has established an audit committee consisting of three independent non-executive directors to enhance corporate governance[109] - The company expressed gratitude to management and employees for their efforts during the year, highlighting the importance of their contributions to overall performance[192] Cash Flow and Financial Position - Operating cash flow increased to approximately RMB 738.8 million in 2023 from approximately RMB 311.7 million in 2022[75] - Cash and cash equivalents as of December 31, 2023, were approximately RMB 1,386.3 million, up from RMB 596.7 million as of December 31, 2022[98] - The net cash inflow from operating activities for the year ended December 31, 2023, was RMB 753,503 thousand, compared to RMB 312,645 thousand for the previous year[120] - The total assets as of December 31, 2023, reached RMB 2,790,856 thousand, compared to RMB 1,720,217 thousand in 2022, reflecting a growth of approximately 62.2%[113] Acquisitions and Strategic Moves - The company completed the acquisition of Blue City Holdings Limited on August 2, 2023, enhancing its operational capabilities in the social business sector[149] - The company is actively pursuing acquisition opportunities, as indicated by the agreement with Spriver for share acquisition[200] Risks and Future Outlook - The company acknowledges the risks and uncertainties associated with forward-looking statements regarding its business outlook and financial performance[193] - The company plans to continue expanding its market presence and investing in innovative technologies to drive future growth[148]