Profit growth is significant, maintaining "buy"
Chizi City Technology (Chizi City) 1H22 revenue rose 33.43% year-on-year to 1.387 billion yuan, while home net profit increased 121.3% year-on-year to 82.71 million yuan, mainly due to the continued growth of its social business and the outstanding performance of innovative businesses such as boutique games. Considering that the proportion of minority shareholders' equity is higher than we previously expected, we adjust the 22-24 homing net profit forecast to 184x82max 548 million (the previous value is 304max 42max 498 million), EPS is 0.15max 0.32max 0.46, which is comparable to the company's Bloomberg consensus estimate of 12 times the 2022 forecast PE, considering the good development of the company's social business, the innovative business is actively incubating. We give a valuation of 17 times the 2022 forecast PE, corresponding to a target price of HK $2.91 (previous value of HK $4.48). Maintain a "buy" rating.
International expansion of applications and continuous development of social networks
The company's 1H22 social service has a cumulative total of 420 million downloads; 2Q22's MAU reached 23.09 million, up 27% from a year earlier; and social business revenue was 1.27 billion yuan, up 52% from a year earlier. Business growth is mainly due to the continuous localization and intelligence of social media applications that have driven the company's successful experience of replicating social software in multiple markets. Its Yumy is on the list of Top 10 best-selling social apps in 50 countries. MICO has made breakthroughs in high-value markets such as the United States and Japan. YoHo is expanding rapidly in the non-Middle East.
The second growth curve emerges to explore gaming and meta-cosmic business.
The company has launched two boutique games around the world, and under the vigorous promotion, the two products will enter the stage of large-scale commercialization. In addition, the company has embedded the meta-universe function Meta Town in Yumy and launched the world's first video social network digital collection. Chizi City has partnered with a number of head virtual technology companies to invest in smart wearable devices to create more immersive social and gaming products.
Further develop social network applications and explore diversified business
Chizi City takes social business as the core, and extends to innovative business, forming an audio and video social product matrix represented by Yumy, MICO and YoHo. The company has also made steady breakthroughs in games, such as Mergeland, which has good data performance. In addition, the company actively explores the meta-universe and initially constructs the meta-universe module Meta Town in Yumy. Maintain a "buy" rating.
Risk Tip: fierce competition on social media tracks in overseas markets and changes in local regulatory rules.