Core Viewpoint - The report from CICC indicates a significant increase in the Total Payment Volume (TPV) for Lianlian Digital, leading to an upward revision of revenue forecasts for 2025 and 2026 by 2% to 1.65 billion and 2.02 billion HKD respectively, while maintaining adjusted profit estimates unchanged [1] Group 1: Financial Performance - In 1H25, Lianlian Digital's revenue increased by 27% year-on-year to 780 million HKD, with net profit turning positive at 151 million HKD compared to a net loss of 350 million HKD in 1H24, largely due to over 1.6 billion HKD in gains from the sale of part of its stake in LianTong [2] - The TPV for 1H25 rose by 32% year-on-year to 2.1 trillion HKD, outpacing the revenue growth of 27% [3] - Gross profit for 1H25 increased by 25% year-on-year to 410 million HKD, maintaining a high gross margin of 52% [4] Group 2: Business Segments - Global payment TPV surged by 94% year-on-year to 198.5 billion HKD, although the overall fee rate declined to 24 basis points due to higher growth in lower-fee service trade and B2B sectors [3] - Domestic payment TPV grew by 28% year-on-year to 1.9 trillion HKD, with a stable fee rate of 1.1 basis points [3] - Value-added services revenue increased by 34% year-on-year to 90 million HKD, primarily driven by contributions from virtual card services [3] Group 3: Strategic Initiatives - The company plans to allocate 50% of the funds raised from placements to enhance blockchain technology applications in cross-border payments, aiming to improve efficiency and security [7] - The company has received approval for the VATP virtual asset trading platform license, which is expected to expand its service capabilities in cross-border payments [7] - The company anticipates steady growth in TPV and payment revenue, projecting a near 700 million HKD in regular operating profit for 2025 [6]

Core Viewpoint - The company is optimistic about its potential in the cross-border payment sector, highlighting its merchant accumulation, brand recognition, and market share growth potential, with a target price of HKD 17.3, indicating a potential upside of 40% from the latest closing price [1] Group 1: Business Overview - The company's digital payment business is divided into global payments, primarily serving cross-border e-commerce sellers, and domestic payments, catering to enterprise clients [1] - For 2024, the company's total payment volume (TPV) is projected to reach CNY 3.3 trillion, with global and domestic payment TPV expected to be CNY 281.5 billion and CNY 3.0 trillion, respectively, reflecting year-on-year growth of 63% and 65% [1] - Total revenue for 2024 is forecasted at CNY 1.31 billion, a 28% increase year-on-year, with global payments contributing 70% to digital payment revenue [1] Group 2: Market Position and Competition - The cross-border payment service market is relatively fragmented, with key competitors including Payoneer, PingPong, and others [1] - The company's global payment TPV is expected to account for 13.1% of China's cross-border e-commerce export value in 2024, up from 9.4% in 2023 [1] Group 3: Future Opportunities - The company has obtained a Virtual Asset Trading Platform (VATP) license, positioning it for future opportunities in virtual asset trading and stablecoin issuance [2] - Stablecoins are anticipated to be utilized in cross-border trade for small currency payments and settlements, addressing issues such as long settlement cycles and high fees [2] Group 4: Financial Projections - For 2025, the overall TPV is expected to grow by 27%, with global payments and domestic payments projected to increase by 45% and 25%, respectively [2] - Total revenue for 2025 is estimated to reach CNY 1.63 billion, a 24% year-on-year increase, with a stable gross margin of 52% [2] Group 5: Valuation - The company employs a Sum-of-the-Parts (SOTP) valuation method, assigning a target price of HKD 17.3, which includes a valuation of HKD 16.0 from its core business and HKD 1.3 from its equity stake in a connected company [3] - The company is viewed positively due to its growth in TPV, revenue, and profit improvement prospects, alongside innovations in cross-border payment technology [3]

Investment Rating - The report initiates coverage on LianLian Digital with a "Buy" rating and a target price of HKD 17.3, representing a potential upside of 40% from the latest closing price of HKD 12.42 [6]. Core Insights - LianLian Digital is positioned as a leading 2B digital payment service provider, focusing on cross-border payment solutions for e-commerce merchants. The company has a strong potential for market share growth due to its established brand and merchant base [2][11]. - The company has obtained a Virtual Asset Trading Platform (VATP) license, which may open up future business opportunities in virtual asset trading and stablecoin issuance [3][12]. - The financial outlook is positive, with projected total revenue of HKD 16.3 billion in 2025, reflecting a year-on-year growth of 24% [3][5]. Company Overview - LianLian Digital primarily offers digital payment solutions, including global and domestic payment services. The company has served over 5.9 million merchants and achieved a total payment volume (TPV) of approximately HKD 3.3 trillion in 2024, with a year-on-year growth of 65% [11][45]. - The company has a diversified revenue stream, with digital payment services contributing 88% of total revenue in 2024 [18]. Financial Performance - In 2024, LianLian Digital reported total revenue of HKD 13.1 billion, a 28% increase from the previous year. The global payment segment contributed 70% of the digital payment revenue [2][18]. - The company achieved an adjusted net profit of HKD 79 million in 2024, marking its first profitable year [24][30]. Market Position and Competitive Landscape - LianLian Digital holds a significant market share in the cross-border payment sector, with its global payment TPV accounting for approximately 13.1% of China's cross-border e-commerce export value in 2024 [2][45]. - The competitive landscape in the cross-border payment industry is fragmented, with key players including Payoneer, PingPong, and others [2][11]. Future Opportunities - The company is well-positioned to capitalize on the growing demand for digital payment solutions in the cross-border e-commerce market, which is projected to reach USD 1.2 trillion by 2024 [46]. - The potential issuance of stablecoins could provide additional revenue streams, particularly in cross-border trade scenarios where traditional payment methods face challenges [3][12].