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]
赤子城科技：社交出海赛道领跑者，多元产品矩阵抢占中东市场