Investment Highlights - The company is initiating coverage on Zhizi City Technology (09911) with an "outperform" rating and a target price of HKD 11.30, based on a 14x Non-IFRS P/E valuation for 2025, implying a 2x P/S valuation for 2025 [1] - The company has launched dozens of applications and casual games in the social and gaming sectors, serving over 1 billion users across more than 100 countries and regions, with a focus on the Middle East and North Africa while actively expanding into Southeast Asia, Europe, and Japan [1] Market Opportunity - The global social application market is expected to grow from USD 61 billion in 2023 to over USD 300 billion by 2030, with a CAGR of 26%, indicating a healthy growth environment for overseas entertainment social platforms [1] - The company believes that smaller platforms with cultural depth can seize structural opportunities due to the limitations faced by major players amid geopolitical tensions [1] Product Matrix and Business Strategy - The company has strengthened its core business through the acquisition of Mico World, diversifying into niche social segments while maintaining a "bush" strategy that enhances commercialization efficiency [2] - The company expects MICO and YoHo to enter a mature phase, contributing stable cash flow, while SUGO and TopTop are anticipated to support revenue growth [2] Global Expansion and Innovation - The company has positioned the Middle East and North Africa as a long-term strategic region, contributing over 50% of its social revenue, and plans to deepen its presence in high ARPU markets in Europe and the U.S. [3] - The company estimates that several products in the growth phase will contribute approximately 10% of social revenue in 2024, supporting future performance breakthroughs [3] - The company anticipates that marketing expenses may remain high in the short term but expects operational leverage to gradually improve as customer acquisition efficiency increases [3] Earnings Forecast and Valuation - The company projects EPS of 0.8 CNY and 1.0 CNY for 2025 and 2026, respectively, with a CAGR of 54% [3] - The initial coverage gives an "outperform" rating based on a 14x Non-IFRS P/E for 2025, with a target price of HKD 11.30, representing a 20% upside from current trading levels [3]