Investment Rating - The report maintains a "Buy" rating for the company [8] Core Views - The company is expected to achieve total revenue of approximately 5.0 to 5.2 billion RMB in 2024, representing a year-on-year growth of 51.1% to 57.2%. The net profit attributable to the parent company is projected to be between 460 to 500 million RMB, showing a decline of 10.3% to 2.5%. However, excluding the impact of a 160 million RMB investment income from the acquisition of a subsidiary in Q3 2023, the net profit is expected to grow by 29.9% to 41.2% [1] - The growth is primarily driven by AI technology, which is enhancing the rapid growth of diversified social products, alongside the consolidation of Blue City Brothers and Land of Glory Ltd. starting from Q3 2023 [1] Summary by Sections Social Business - The social business, including diverse social services, is expected to generate revenue of 4.52 to 4.72 billion RMB in 2024, reflecting a growth of approximately 54.3% to 61.1%. The cumulative download volume is projected to reach 780 million [2] - The growth is attributed to AI-driven diversified social products and the consolidation of Blue City Brothers and Land of Glory Ltd. The company focuses on broad audience social services, creating a product matrix represented by MICO, YoHo, TopTop, and SUGO. SUGO's revenue is expected to grow over 200% in 2024, becoming the highest-grossing social product in a single month [2] Innovative Business - The innovative business segment is projected to achieve revenue of 440 to 480 million RMB in 2024, with a growth rate of 16.1% to 26.6%. The "second growth curve" led by premium games and social e-commerce is becoming clearer [3] - The flagship game "Alice's Dream: Merge Games" continues to perform well, achieving approximately 705 million RMB in revenue, an increase of about 80.4% compared to 2023, marking the entry into profitability for this segment [3] AI Applications - AI technology is increasingly applied across business operations, enhancing efficiency from research and development to marketing. The self-developed multi-modal algorithm model Boomiix has been upgraded, significantly improving social efficiency and user willingness to pay. The ARPU value for SUGO at the end of 2024 is expected to increase by over 20% compared to the beginning of the year [4] Profit Forecast and Valuation - The profit forecast for the net profit attributable to the parent company has been adjusted to 483 million RMB for 2024, 776 million RMB for 2025, and 910 million RMB for 2026, reflecting adjustments of 7.13%, 40.91%, and 41.06% respectively. The target price is set at 8.35 HKD, based on a 12X PE for 2025, considering Tencent's valuation premium as an industry leader [5]
赤子城科技：净利高增，AI推动社交产品快速增长-20250307