Newborn Town Received ‘Buy’ Rating from Several Brokers as it Achieved YoY Increase of 124% in Interim Profit

Several securities companies maintained a ‘Buy’ rating on Newborn Town Inc. (“Newborn Town”; 9911. HK), the tech company focusing on social networking and entertainment business globally, as it has seen a substantial profit rise for the first half of 2023.

During this period, Newborn Town recorded a net profit of RMB 302 million, representing a YoY increase of around 96%. The adjusted EBITDA reached RMB 347 million, representing an increase of 65% compared to the corresponding period in 2022. The profit attributable to the owners of Newborn Town rose by 124% to RMB 185 million.

According to the research report by Huatai Securities on August 25, Newborn Town has completed its adjustment of the content ecosystem, enabling it to achieve a higher gross profit margin afterward. It gave the company an estimated P/E (price-to-earnings) ratio of 10x for FY2023, with a forecasted target price of HKD 2.91.

China Securities maintained a ‘Buy’ rating on Newborn Town, with the P/E ratio standing at 10x and the target price being HKD 2.95. The research report on August 26 said that Newborn Town’s social networking product mix continued to improve. Its innovative business has made rapid breakthroughs. Following the consolidation of BlueCity, Newborn Town is expected to achieve a solid increase in revenue and profit in 2024.

Another ‘Buy’ rating was issued by Essence International, with the target price at HKD 3.7, based on the P/E ratio of 12x in 2023. According to its report on August 30, Newborn Town was still at a fast-growing stage. Given its core advantage, which is the ‘localization capability’ and the practice of strategies regarding the ‘replication’ of experiences among various products and countries, Newborn Town’s gross margin rate has substantially improved in 2023 as the performance in overseas markets has forged ahead steadily.

Oriental Patron maintained a ‘Buy’ rating on Newborn Town with a new target price of HKD 3.80, representing 12.3x/8.6x PE in FY23E/24E. Blued, the flagship product of BlueCity, is forecasted to generate revenue of approximately RMB 1 billion and a net profit of RMB 100 million for FY24E, according to the research report on September 4.

The stock price of Newborn Town rose by 3.73% to HKD 1.670 per share on September 5.