Core Viewpoint - The company is expected to see significant revenue growth in the first half of 2025, driven by user growth in its social business and accelerated performance in its innovative business segment [1][2]. Group 1: Revenue and Profit Forecast - The company forecasts a 39.5% year-on-year increase in revenue for 1H25, reaching 3.17 billion yuan, with social business revenue growing by 36.7% to 2.83 billion yuan and innovative business revenue increasing by 68.5% to 340 million yuan [1]. - The expected net profit attributable to the parent company for 1H25 is 500 million yuan, with Non-IFRS net profit projected at 570 million yuan [1]. Group 2: User Growth and Market Expansion - The company's social business maintained rapid growth, with 2Q25 monthly active users (MAU) reaching 33.85 million, reflecting a 3% quarter-on-quarter increase and a 19% year-on-year increase [1]. - The company continues to expand into new products and markets, with significant user growth in YoHo, SUGO, and TopTop, and strong performance in Turkey and Saudi Arabia, as well as rapid growth in small base, high ARPU markets in Europe and the US [1][2]. Group 3: Innovative Business Growth - The innovative business is expected to see a year-on-year increase of 65.0%-74.9% in 1H25, reaching 340-360 million yuan, driven by rapid development in traffic monetization and social e-commerce [2]. - The innovative business accounted for only 9% of total revenue in 2024 but has a significantly higher gross margin than the social business, indicating potential positive contributions to overall profitability as commercialization progresses [2]. Group 4: Profitability and Valuation - The company has slightly raised its profit expectations for the year due to improved operating profit margins, with a focus on the second half of the year being a peak season for revenue [2]. - The company maintains its revenue forecasts for 2025 and 2026, while increasing Non-IFRS net profit estimates by 2% and 1% to 1.09 billion yuan and 1.26 billion yuan, respectively [2].

Group 1 - The core viewpoint of the report is that the company maintains its revenue forecasts for 2025 and 2026 while slightly increasing its Non-IFRS net profit estimates for those years [1] - The company is expected to achieve a 39.5% year-on-year revenue growth in 1H25, reaching 3.17 billion yuan, driven by a 36.7% increase in social business revenue and a 68.5% increase in innovative business revenue [1][2] - The social business's monthly active users (MAU) reached 33.85 million in 2Q25, showing a 3% quarter-on-quarter growth and a 19% year-on-year growth, with a total of 870 million downloads [1] Group 2 - The innovative business is projected to grow significantly by 65.0%-74.9% year-on-year in 1H25, reaching 340-360 million yuan, primarily driven by traffic monetization and the rapid development of social e-commerce [2] - The company is focusing on optimizing operational leverage, with an expectation of improved profit margins in 1H, and anticipates a strong revenue rebound in 2H due to seasonal factors and successful new product launches [3] - The company is optimistic about the revenue elasticity in 2H, supported by enhanced marketing strategies and AI efficiency improvements [3]

Core Viewpoint - The company, Zhizi City Technology, is expected to report significant revenue growth for the first half of 2025, driven by strong performance in its social and innovative business segments [2][3]. Group 1: Revenue Expectations - The total revenue for the first half of 2025 is projected to be between 3.135 billion and 3.215 billion yuan, representing a year-on-year growth of 38.0% to 41.5% [2]. - The social business is expected to generate revenue between 2.8 billion and 2.86 billion yuan, with a year-on-year increase of 35.4% to 38.3% [2]. - The innovative business is anticipated to see explosive growth, with revenue expected to be between 335 million and 355 million yuan, reflecting a year-on-year growth of 65.0% to 74.9% [2]. Group 2: Business Performance - The social business has shown high-quality growth, with the "Bush" product matrix thriving in global markets, particularly with strong growth from the latecomer products SUGO and TopTop [2][3]. - Key performance indicators for SUGO, including average revenue per user (ARPU) and payment rates, have steadily improved, with SUGO ranking 7th in social network app revenue in the Middle East [3]. - The company has successfully expanded its market presence in Latin America and Europe, demonstrating good market adaptability for SUGO's product forms and business models [3]. Group 3: Innovation and Future Growth - The company is deepening the application of AI technology in its core business, enhancing customer acquisition, localization, and monetization efficiency [2]. - The innovative business segment, including premium games and social e-commerce, is gradually becoming a clear second growth curve, contributing to steady revenue growth [3]. - The company has accumulated successful experience in the casual gaming sector, leading to shorter game development cycles and improved operational efficiency, which is expected to drive stronger growth in the future [4].

Core Insights - The company expects total revenue for the first half of 2025 to be between RMB 31.35 billion and RMB 32.15 billion, representing a year-on-year growth of 38.0% to 41.5% compared to the same period in 2024 [1] - The social business continues to show strong performance, with expected revenue between RMB 28.00 billion and RMB 28.60 billion, reflecting a year-on-year increase of 35.4% to 38.3% [1] - The innovative business is experiencing explosive growth, with expected revenue between RMB 3.35 billion and RMB 3.55 billion, indicating a year-on-year growth of 65.0% to 74.9% [1] Social Business Development - The social business of the company has maintained high-quality growth, with the "Bush" product matrix thriving in global markets [3] - New products SUGO and TopTop are showing strong growth, while core products MICO and YoHo continue to contribute stable revenue [3] - The growth in social business revenue is attributed to the application of AI technology, enhancing customer acquisition, localization, and monetization efficiency [3] - Key operational metrics for SUGO, including average online duration per user, ARPU, and payment rate, have steadily improved [3] Global Market Expansion - The company is expanding its global market presence, with SUGO showing good market adaptability in Latin America and Europe [5] - The social business targeting diverse demographics continues to develop healthily in overseas markets, particularly in Southeast Asia [5] - HeeSay has solidified its position in Southeast Asia, ranking 16th in the Google Play revenue chart for social apps in the region [5] Innovative Business Growth - The company is building a second growth curve through innovative businesses such as premium games and social e-commerce [6] - The premium game business, represented by "Alice's Dream: Merge Games," has entered a long-term operational phase, contributing stable profits [6] - The social e-commerce platform HeeSay is also experiencing rapid growth, maintaining its leading position in HIV prevention and sexual health services [6] Global Strategy - The establishment of the company's global headquarters in Hong Kong marks a new phase in its globalization strategy [7] - The company aims to leverage technology to empower social entertainment and explore diverse development opportunities in global markets [7]

Core Insights - The report highlights the increasing investment from insurance funds in the environmental sector, particularly in water and waste management companies, indicating a strong investment value in this sector [2][10][13] - The government policies are expected to further enhance the investment capacity of insurance funds, providing a stable influx of capital into the market [2][10] - The environmental sector is characterized by stable cash flows and strong profitability, driven by essential municipal services and favorable operating models [2][10][13] Summary by Sections Investment Trends - Insurance funds have been actively increasing their stakes in environmental assets, with notable investments in companies like Green Power and China Water Affairs [2][10][13] - The report notes that since 2023, several insurance companies have made significant investments in various water and environmental firms, showcasing the sector's attractiveness [2][10] Financial Performance - The water and waste management sector is described as having stable demand and revenue, with costs primarily related to depreciation and labor, leading to consistent profitability [2][10][13] - The report anticipates improvements in cash flow and dividend payouts as the sector matures, with capital expenditures (Capex) significantly decreasing [3][10][13] Investment Recommendations - The report recommends several A-share and H-share companies in the environmental sector, including Hanlan Environment, Xingrong Environment, and Everbright Environment, citing their strong profit certainty and improving cash flows [3][10][13] - It emphasizes that investments in environmental assets can yield multiple benefits, including dividends, earnings per share (EPS) growth, and valuation increases [3][10][13]

Investment Rating - The report initiates coverage with a "Buy" rating for the company [2][8]. Core Insights - The company is a leading social media company focused on overseas markets, transitioning from mobile tools to social applications, with a strong presence in the Middle East and North Africa, as well as expansion into Southeast Asia, Europe, and North America [5][17]. - The company has a diversified product matrix, including MICO, YoHo, TopTop, and SUGO, with significant growth in innovative gaming and AI-driven products [7][19]. - The financial forecast indicates substantial revenue growth, with expected revenues of RMB 69 billion in 2025, representing a 35% year-on-year increase [6][60]. Summary by Sections 1. Company Overview - The company is recognized as a pioneer in social media, focusing on enhancing social entertainment experiences globally [5][17]. - It has successfully transitioned to social applications, with key products contributing to its revenue base [5][19]. 2. Market Potential - The Middle East and North Africa (MENA) region presents a lucrative market due to its young population and high GDP per capita, with significant potential for social media consumption [31][32]. - The company is leveraging local market insights to enhance product offerings and operational efficiency [35][38]. 3. Business Segments - The company operates in three main segments: general social, diverse social, and innovative business, with the general social segment being the primary revenue driver [26][28]. - The diverse social segment, particularly through the acquisition of Blued, targets the LGBTQ+ community, which is characterized by high income and spending power [46][49]. 4. Financial Performance - The company has demonstrated strong revenue growth, with a compound annual growth rate (CAGR) of 44% from 2020 to 2024, primarily driven by its social business [26][28]. - The forecast for net profit indicates a significant increase, with expected profits of RMB 9.5 billion in 2025 [6][8]. 5. Innovation and AI Integration - The company is focusing on innovative business models, including gaming and social e-commerce, with flagship games showing promising revenue growth [52][53]. - AI technology is being integrated into product operations to enhance user experience and operational efficiency, exemplified by the launch of the AiPPY platform [56][57].

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]

Group 1 - The global headquarters of the company, ZhiZi City Technology, was officially launched in Hong Kong, marking a significant milestone in its globalization strategy [1][4] - The company has established over 20 operational centers in markets such as the Middle East and Southeast Asia, with its products reaching over 150 countries and regions [5] - The chairman of the company emphasized Hong Kong's international business environment, mature capital market, and top talent resources as key factors for the headquarters' establishment [4] Group 2 - The company plans to focus on two main directions in Hong Kong: exploring deep applications of artificial intelligence in social entertainment and gathering global talent to promote industry-academia-research collaboration [8] - The establishment of the global headquarters in Hong Kong follows the opening of a regional headquarters in Riyadh, Saudi Arabia, enhancing the company's connection with the Middle Eastern market [8] - The company aims to foster innovation and collaboration with the Hong Kong government, industry partners, and investment institutions to create a positive global impact [8]

Group 1 - Core viewpoint: The company is strategically positioned to capitalize on the overseas internet population dividend and the high growth trend of audio and video social networking, continuously exploring niche market demands and expanding its product matrix to initiate a new growth cycle [1] - Key insight 1: The company's core business advantages include strong organizational capabilities, deep local product operations, a multi-country and multi-product strategy that allows for low marginal costs and rapid iteration, and a diverse product offering that meets various emotional value needs across different social scenarios [1] - Key insight 2: The acquisition of BlueCity Brothers is a rare asset, and the launch of the HeeSay brand overseas aims to tap into the growing LGBTQ market, with the company’s product Blued maintaining a leading position in the domestic LGBTQ social sector [1] Group 2 - Key insight 3: The global casual gaming market is expanding, with the company’s flagship game "Alice's Dream: Merge Island" projected to achieve a 60% year-on-year revenue growth in 2024 and potentially become profitable by the fourth quarter of 2024 [2] - Key insight 4: The company has several mobile games in the pipeline, which are expected to contribute additional revenue in the latter half of the year [2] - Financial forecast: The company’s revenue and profit are expected to steadily increase, with projected revenues of 6.6 billion, 8.3 billion, and 10.3 billion yuan for 2025-2027, and corresponding net profits of 980 million, 1.34 billion, and 1.78 billion yuan [2]

Investment Rating - The report assigns a "Buy" rating for the company, marking its first coverage [1]. Core Insights - The company is positioned as a pioneer in overseas social networking, leveraging a diverse product matrix to capture global opportunities [8]. - The report highlights the company's stable core business in social networking, with strong growth potential from late-stage products [8]. - The acquisition of BlueCity Brothers is noted as a strategic move to tap into the growing LGBTQ market, with the launch of the HeeSay brand aimed at expanding into Southeast Asia and Western markets [9]. - The company is also expanding its presence in the casual gaming sector, with a notable increase in revenue from its flagship game [10]. Company Overview - The company has a decade-long history of development, combining self-developed and acquired products to build a diverse product matrix [14][15]. - The business model is divided into two main segments: social business and innovative business, with social business contributing the majority of revenue [17]. Financial Performance - Revenue is projected to grow significantly, with estimates of 6.628 billion in 2025, 8.297 billion in 2026, and 10.274 billion in 2027 [6]. - The company expects a rebound in net profit, forecasting 980 million in 2025, 1.335 billion in 2026, and 1.774 billion in 2027 [6]. - The adjusted EBITDA is also anticipated to rise, with projections of 1.319 billion in 2025 and 1.739 billion in 2026 [6]. Market Position - The global social application market is experiencing rapid growth, with the company focusing on localized operations and a multi-modal product strategy to meet diverse user needs [36][41]. - The report indicates that the company has a strong understanding of local markets, which enhances its operational effectiveness [56]. Product Strategy - The company has developed a multi-product strategy that allows for rapid iteration and testing, reducing marginal costs and diversifying market risk [57]. - Key products include MICO, YoHo, TopTop, and SUGO, each targeting different social interaction needs [8][9]. Growth Potential - The report emphasizes the potential for significant growth in the LGBTQ social networking space, particularly through the HeeSay brand [9]. - The casual gaming segment is also highlighted as a promising area, with expectations for continued revenue growth from new game releases [10].