Global replication enhanced by AI efficiency

Newborn Town | 09911.HK COMPANY UPDATE Global replication enhanced by AI efficiency H F NGO, Brian, CFA SENIOR ANALYSTbrianngo@westbullsec.com.hk+852 3896 29652701–2703,27/F, Infinitus Plaza, 199 Des Voeux RdCentral, Sheung Wan, HK STOCK RATING BUY Newborn Town (09911.HK)reported revenue of RMB 6,889.0mn in 2025, up 35.3% YoY. The gross marginimproved to 55.8%, while attributable profit surged 94.6% YoY to RMB 934.5mn. Social networkingrevenue reached RMB 6,142.3mn, up 32.9% YoY, while innovative business revenue reached RMB 746.7mn,up 59.3% YoY. Newborn Town (09911.HK) Stock Rating(Previous Rating)BUY(BUY)Target Price(Previous TP)HK$ 11.30(HK$ 13.20)Current PriceHK$7.9652-Week RangeHK$4.75–14.09Market cap. (HKD, bn)HK$ 11.2 MENA monetization at the core, overseas replicationas upside:SUGO and TopTop are likely to remain theprimary growth engines of the social segment in 2026, after delivering revenue growth of more than 80%and 70%, respectively, in 2025. Both products also recorded profit growth of more than 100% in 2025.Their strong performance was mainly driven by user expansion and ARPU improvement. We expect theMENA market to remain the primary revenue source for both SUGO and TopTop in 2026, while globalreplication could become another key highlight of the Group’s growth strategy. SUGO appears particularlywell positioned in Latin America, given the region’s large addressable market and common-languagestructure across countries,which should support replication of the successful MENA playbook;management also disclosed that its monthly revenue in Latin America increased by more than 300% fromthe beginning to the end of 2025. TopTop, by contrast, looks more like a localization-driven story in high-barrier markets such as Japan, where it has already reached No. 6 in the App Store games ranking. Multi-engine monetization takes shape:We believe a multi-engine monetization model is graduallyemerging across the innovative business segment. This includesin-app purchases and advertisements inniche games, paid viewing and advertisements for short dramas, as well as sales and supporting servicesof health products through social e-commerce. Global replication enhanced by AI efficiency:We believe the recent share price weakness was primarilydriven by market concerns over geopolitical tensions in the Middle East. However, if the Group canmaintaina stable MENA base while continuing to deliver overseas replication and localizationbreakthroughs, the market may further re-rate it from a“Middle East social networking company”into a“global social entertainment platform with repeatable expansion capability.”At the same time, thebenefitsof AI have already moved beyond concept, with applications across recommendation and matching,socialmatching, content supply,content diversityand operational efficiency. In our view, the key rerating catalystin 2026 is not revenue growth alone, but the Group’s ability to execute on“global replication + AI-drivenefficiency.”We therefore maintain our“BUY”rating, but lower our target price to HKD 11.30 to reflect recentuncertainties. Peers comparison Risk Factors ◼The strong performance of SUGO and TopTop may not be sustainable◼A sudden deterioration in the MENA macro environment due to escalating geopolitical tensions◼Marketing expenses may rise faster than expected and become difficult to control◼Payback in new markets may fall short of expectations◼Spending on AIand short drama may become overly aggressive Financial Statement West Bull Securities is a dedicated small/mid cap stock brokerage house. Find our research on: Alphasense, FactSet, Capital IQ,Refinitiv, Wind, Choice, Hibor,iFinD and發現報告. Ratings of West Bull Securities: STRONGBUY:absoluteupside of >50% over the next 12 monthsBUY:absoluteupside of >10% over the next12monthsHOLD: absolute return of-10% to +10% over the next 12 monthsSELL: absolute downside of >10% over the next 12 monthsSTRONGSELL: absolute downside of >50% over the next 12 months Investors should assume that West Bull Securities is seeking or will seek investment banking or other related businesses with thecompanies in this report. Analyst certification:The views expressed in this report accurately reflect the analyst’s personal views of the subject securities andthat the analyst has not received and will not receive direct or indirect compensation in exchange for expressing specificrecommendations or views in this report. Disclaimer: This research report is not an offer to sell or the solicitation of an offer to buy or subscribe for any securities. The securities referredto in this report may not be eligible for sale in some jurisdictions. The information contained in this report has been compiled bythe Research Department of West Bull Securities Limited (‘West Bull Securities’) from sources that it believes to be reliable but norepresentation, warranty or guarantee is made or given by West Bull Securities Securities or any other person as to it