CICC: Maintains NEWBORNTOWN (09911) Outperform rating with a target price of HK$14.5.

CICC released a research report stating that it maintains the revenue and Non-IFRS net profit forecasts for NEWBORNTOWN (09911) for 2025 and 2026, and introduces revenue and Non-IFRS net profit forecasts for 2027 of 9.8 billion yuan and 1.4 billion yuan. It maintains an outperform industry rating and a Hong Kong stock target price of HK$14.5, corresponding to a 2026 Non-IFRS P/E ratio of 14 times, with a 7% upside potential (currently trading at 13 times / 11 times 2026/2027 Non-IFRS P/E ratio). CICC's key points are as follows: Forecasting a 32% year-on-year increase in revenue for NEWBORNTOWN in 2H25 The bank expects NEWBORNTOWN's revenue in 2H25 to increase by 32% year-on-year to 3.7 billion yuan: social business revenue is expected to grow by 30% year-on-year to 3.3 billion yuan, while innovative business revenue is expected to grow by 52% year-on-year to 400 million yuan. The bank expects the company's 2H25 Non-IFRS net profit attributable to shareholders to be 500 million yuan. Continued growth trend in broad-based social interactions The company expects FY25 social revenue to reach 6.1 billion yuan (up 33%), in line with the bank's previous expectations. The bank calculates that social revenue in 4Q25 will increase by 28% year-on-year. In 4Q25, the company's social business MAUs reached 35.28 million (up 4% quarter-on-quarter, up 11% year-on-year), with social app cumulative downloads reaching 970 million (up 6% quarter-on-quarter), and growth rates accelerating. According to Sensor Tower, SUGO and TopTop's monthly active users and revenue continued to grow, with SUGO accelerating in December; in addition, the old product MICO's monthly actives and revenue stabilized compared to the previous quarter. Looking into 2027, the company expects its core products to continue deepening in the core Middle East market and actively expanding into new regions such as Japan and South America, which may support a 30% year-on-year growth in broad-based revenue, potentially offsetting fluctuations in land-based revenue. High growth in short video revenue, increased investment in AI and short video in 2027 The company expects FY25 innovative business revenue to reach 750 million yuan, accelerating compared to 2024, with short video revenue growing rapidly. According to Sensor Tower, the company's short video app users and revenue doubled year-on-year. Looking into 2027, the company expects innovative business revenue to grow by over 30%, with new games contributing flexibility. In addition, the company expects to increase investment in short video and AI in 2027, with the AI creative content community Aippy mobile app already launched. Optimization of core product profit margins expected to offset investment in new businesses SUGO, TopTop, and other core product operating profit margins continue to improve; and AI tools (such as the internal Agent "Si Yu") empower product development and content generation, optimizing marketing ROI and overall operational efficiency. The bank maintains its forecast for a 2026 Non-IFRS net profit attributable to shareholders of 1.26 billion yuan. Risk factors: Geopolitical and macroeconomic risks, M&A integration risks, risks in expanding innovative business, regulatory compliance risks, exchange rate fluctuations, and risks of profit compression due to anchor revenue sharing.