【行业研究报告】赤子城科技-A breakthrough in the innovative business and an increase in profitability from a diversified product portfolio

NewbornTown|09911.HK
NewbornTown|09911.HK
Abreakthroughintheinnovativebusinessandanincreasein
profitabilityfromadiversifiedproductportfolio
STOCKRATING
BUY
TARGETPRICE
HK$5.73
SugoandTopTopbecamethemajorcontributors:NewbornTown(09911.HK)reporteda
remarkableYoYrevenueincreaseof53.9%increase,reachingRMB5,091.5mnfortheyear
ended31Dec2024.TheMENAmarkethasprovenresilient,withSugoandTopTopemerging
astheprimaryrevenuedrivers,eachexperiencingsubstantialgrowth—over2xand1x,
respectively.TheseAPPshavecollectivelycontributedrevenueonparwithestablished
productslikeMicoandYoHo.Theoptimizationofthesocialrecommendationalgorithmhas
significantlyenhancedSugo'sperformance,withamonthlyrechargeamountingtoUSD
10mnandanimpressiveover20%improvementinARPU.TheMENAregionremainscrucial
fortheGroup’sexpansionstrategy,andusergrowthforSugoandTopTopalsoremainsa
primarybusinessfocus.Tocapitalizeonanticipatedmarketgrowth,weanticipatethat
marketingexpenditureswillremainelevated.
Innovativebusinessgainedluster:Theinnovativebusinesssegmenthasshownpromising
advancements,particularlyinthenichegamebusiness.Therechargeofthegamessoared
YoY80.4%toaboutRMB705mn,contributingapproximatelyRMB22.0mninrevenue.Alice’s
Dreamcontinuedtobetheleadingtitle,andonemoregamewillbereleasedthisyear.
However,thegrossmargininthissegmenthascontracted,primarilyduetotheincreasing
contributionfromthesociale-commerceplatformprovidinguserswithhealth.
Anincreaseintheprofitattributabletoshareholders:TheGroup'sacquisitionofthenon-
whollyownedsubsidiaryowningsocialentertainmentproductssuchasMicoandYoHo,and
theimplementationofaHKD400mnsharerepurchaseschemewillmateriallyimprovethe
profitattributabletoshareholders.
Abreakthroughintheinnovativebusinessandanincreaseinprofitabilityfromadiversified
productportfolio:TheGrouphasdemonstrateditscapacityforreplicationandlocalization,
buildingonthesuccessesofSugoandTopTop.Thebreakthroughininnovativebusiness
segmentsandtheincreasingprofitabilityfromdiversifiedsources,beyondMico,positionthe
Groupfavourablyforfuturegrowth.Strongcashinflowsareprojectedfromthisdiversified
productportfolio,leadingtoasubstantialimprovementinprofitsattributabletoshareholders
followingtheacquisition.Inlightofthesedevelopments,wereviseourtargetpricetoHKD
5.73pershareandmaintainour“BUY”recommendation.