Newborn Town's AI-Driven Social Empire: A Global Play with Undiscovered Upside

Newborn Town Inc. (9911.HK), a global leader in social entertainment, is positioned at a pivotal moment. Leveraging AI innovation, strategic market expansions, and a diversified app portfolio, the company is unlocking growth in underpenetrated regions while trading at a valuation that undervalues its potential. With CITIC Securities projecting a HK$11 price target for 2025—nearly 17% above its current price—the stock presents a compelling opportunity to capitalize on its AI-driven expansion.

The AI Engine: Boomiix Powers Growth

At the heart of Newborn Town's strategy is its self-developed Boomiix multimodal algorithm, an AI system that optimizes user engagement, content recommendations, and monetization across its apps. This technology is critical to its replication strategy, enabling rapid launches of localized social platforms in new markets with minimal costs. For instance, apps like TopTop (up 100% YoY in 2024) and SUGO (200% YoY growth) now operate in high-growth regions like the Middle East and Southeast Asia, where user engagement is soaring.

The Boomiix system's success is reflected in Q1 2025 results: revenue surged 41–48% YoY, with the social networking segment contributing 39–44% growth. AI-driven optimizations have also boosted the innovative business segment (games and e-commerce) by 66–88% YoY, fueled by hits like Alice's Dream: Merge Games and the health-focused Heer Health platform.

Dominating Underserved Markets: MENA and Beyond

Newborn Town's global expansion is guided by its “AI Empowerment + Localized Operations + Global Expansion” framework. A key milestone is its Hong Kong headquarters, launched to attract global AI talent and capitalize on the city's tech ecosystem. This hub supports the company's push into high-potential regions like MENA (Middle East and North Africa), where its MENA headquarters in Riyadh targets a demographic with high disposable income and limited social media penetration.

In the MENA region, Newborn Town's apps now rank among the top social platforms. SUGO and TopTop placed 9th and 14th in Middle Eastern App Store revenue rankings, while HeeSay (targeting LGBTQ+ users) dominates Southeast Asia. With the MENA media market projected to hit $82 billion by 2032, the company's early-mover advantage could translate into sustained revenue growth.

Valuation: A Discounted Growth Story

Despite its rapid expansion, Newborn Town's valuation remains attractively low. At its current price of HK$9.39, the stock trades at 11x 2025E PE, far below its growth rate. CITIC Securities' HK$11 target implies a 7x 2027E PE, suggesting the market hasn't yet priced in the full potential of its AI-driven replication model or new markets.

Recent data underscores this disconnect:
- Revenue CAGR (2020–2024): 44.1%
- 2025E Net Profit: RMB949 million (up 24% YoY)
- Market Cap Growth (2024): +209%

Even after a recent dip (a 5.4% drop on June 5), the stock remains undervalued relative to peers. Meanwhile, its HKD 200 million share buyback program signals management confidence in its prospects.

Risks and Catalysts

Risks include regulatory hurdles in emerging markets and competition in saturated regions. However, Newborn Town's AI-driven differentiation and focus on underserved demographics (e.g., MENA's youth, LGBTQ+ users) mitigate these concerns.

Catalysts for upside include:
1. MENA monetization acceleration as user bases mature.
2. Heer Health's expansion into HIV medication and wellness markets.
3. New game launches with shorter ROI cycles.

Conclusion: A Buy with a Long-Term Horizon

Newborn Town's combination of AI innovation, strategic market dominance, and diversified revenue streams positions it as a leader in global social entertainment. With its valuation lagging behind growth metrics and CITIC's HK$11 target offering a clear upside, the stock is primed for a revaluation. Investors seeking exposure to AI-driven growth and emerging markets should consider accumulating shares at current levels.

Investment Recommendation: Buy. Target HK$11, with a risk-reward favoring long-term holders.
Price Target: HK$11 (CITIC Securities, 2025E)
Current Price (Jun 5, 2025): HK$9.39
Upside Potential: +17%