Revenue expectations surged, but the stock price of "Little Tencent" hello Group opened high and then plunged.
On July 25, $NEWBORNTOWN(09911.HK) , known as the "Little Tencent (00700.HK)", disclosed its operational data for the first half of this year, with multiple indicators performing impressively.
Affected by this, Chizicheng Technology's stock price surged significantly at the opening on July 26, but then experienced a "dive"-like decline, at one point dropping by over 7%.
Social Business Revenue Soars Year-on-Year
Chizicheng Technology was founded in 2009 and began expanding overseas in 2013. The company positions itself as a global open social platform, having developed dozens of apps for global users in social networking, gaming, and utility sectors.
Among these, social networking is Chizicheng Technology's core business, currently forming a diversified product matrix including the open social platform MICO, voice social app YoHo, dating app Yumy, and gaming social app TopTop, as shown below.
Notably, Chizicheng Technology has also invested in the pink economy, which is an important part of its social business.
It is reported that in 2021, Chizicheng Technology entered the LGBTQ social sector by participating in the privatization of BlueCity. BlueCity is a leading platform for diverse social lifestyles globally, with products like the male social entertainment app Blued and the vertical male social platform Finka, which have achieved notable success overseas.
On July 25, Chizicheng Technology disclosed its operational data for the first half of 2024.
In its core social business, the company's total social revenue for the first half is expected to be RMB 2.055 billion to RMB 2.085 billion, a year-on-year increase of approximately 65.3% to 67.7%, showcasing strong performance.
Behind this growth, as of the end of June 2024, Chizicheng Technology's social apps had accumulated approximately 690 million downloads, up 5.9% from the end of March. Additionally, the average monthly active users (MAU) for Q2 reached about 28.554 million, a slight 0.02% increase quarter-on-quarter.
Chizicheng Technology attributed the revenue surge to the rapid growth of its diversified social products and the consolidation of BlueCity and Land of Glory Ltd.'s social business revenues following the acquisition of Chizicheng Strategy Investment in Q3 2023.
Innovation Business Shines
The reason some investors call Chizicheng Technology "Little Tencent" is its exploration and layout in innovation businesses like premium games alongside its social core. Currently, the flagship product of its premium game business is a merge-type mobile game.
In the first half of 2024, Chizicheng Technology's innovation business revenue is expected to be RMB 192 million to RMB 212 million, a year-on-year increase of about 46.6% to 61.8%, demonstrating solid growth.
Within this segment, revenue from casual games and traffic monetization is projected at RMB 133 million to RMB 143 million, up 1.5% to 9.2% year-on-year, while the newly expanded social e-commerce business contributed approximately RMB 59 million to RMB 69 million.
Additionally, Chizicheng Technology disclosed that its independently developed premium game Alice's Dream, distributed by external teams, generated approximately RMB 387 million in gross merchandise volume (GMV), a 392.5% year-on-year increase, driven by the game's growing popularity.
Reportedly, Alice's Dream continued to grow in the first half of 2024, entering Sensor Tower's "Top 30 Chinese Mobile Games by Overseas Revenue" in May and June. However, these revenues are not yet reflected in the company's financials as the games are currently distributed by external teams to cater to overseas user needs.
Closing Remarks:
Despite the strong operational data, Chizicheng Technology's stock price plummeted after an initial surge, possibly due to investor disappointment with certain metrics like the mere 0.02% quarter-on-quarter growth in social MAU.
Overall, Chizicheng Technology's steady progress across key metrics suggests promising interim results. Further measures like dividends or buybacks could reinforce market confidence and potentially drive a more positive stock performance.
Author: Yunzhi Fengqi
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