Lyon: First coverage of NEWBORNTOWN (09911) with an "Outperform" rating and a target price of 17.5 Hong Kong dollars.

Lyon released a research report stating that it has initiated coverage on NEWBORNTOWN (09911) with an "outperform" rating and a target price of 17.5 Hong Kong dollars. The report points out that with the advantage of early entry and the establishment of operational moats, its product strategy will drive revenue growth from diversified applications. Its agile, asset-light business model allows for high return on equity and reliable cash flow generation. Lyon expects that NEWBORNTOWN's revenue and core EBIT will have a compound annual growth rate of 24% and 27% respectively from 2025 to 2027. Lyon forecasts that the company's revenue will have a compound annual growth rate of 24% over the next three years, reaching 9.8 billion yuan in the 2027 fiscal year; total revenue from the general audience business will be 7.9 billion yuan; total revenue from the diversified audience business will be 1.1 billion yuan; and total revenue from the innovative business will be 900 million yuan. Lyon also expects that NEWBORNTOWN's gross profit margin will expand to 57% in the 2027 fiscal year, higher than the 51% in 2024; and the adjusted EBIT margin is expected to reach 18% by 2027, based on a stable sales and marketing cost ratio of around 32% over the next three years.