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]

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 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]

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]