Investment Rating - The investment rating for Newborn Town (09911.HK) is "BUY" with a 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 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].
Strong outlook, but vague on details