Core Viewpoint - CITIC Securities has initiated coverage on the social entertainment company, ZhiZi City Technology, with an "Outperform" rating and a target price of HKD 17.50, indicating a 50% upside potential compared to the closing price of HKD 11.66 on October 10 [1] Group 1: Market Position and Growth Potential - ZhiZi City Technology is enhancing its competitiveness in the MENA region, with business scale growth exceeding 60% year-on-year for both 2024 and the first half of 2025 [2] - The MENA region has a population of over 570 million, a median age of 26, and 400 million internet users, with daily social app usage exceeding 210 minutes, significantly higher than the global average of 143 minutes [2] - The company has established a strong competitive moat globally, particularly in the MENA region, by leveraging proven profit models from the Chinese market and a rich talent pool in the internet sector [2] Group 2: Revenue and Profit Forecast - CITIC Securities predicts a compound annual growth rate (CAGR) of 24% for ZhiZi City Technology's revenue over the next three years, reaching RMB 9.8 billion by the end of 2027, up from RMB 5.1 billion in 2024 [3] - The social business segment is expected to generate total revenue of RMB 7.9 billion by the end of 2027, with a CAGR of 28% from RMB 3.8 billion in 2024, driven by strong growth from SUGO and TopTop [3] - The company anticipates its core EBITDA to grow at a CAGR of 27%, reaching RMB 1.5 billion by 2027, doubling from 2024 levels, primarily due to scale expansion and content ecosystem development [4] Group 3: Margin and Return on Equity - The gross margin is projected to improve from 51% in 2024 to 57% in 2027, driven by a shift towards higher-margin UGC products and gaming business [4] - The return on equity (ROE) is expected to remain above 30% over the next three years, indicating strong profitability and efficient capital utilization [4]
中信里昂点评赤子城科技，全球“快乐制造机”本地化能力优于同业