CMB International Securities released a research report stating that NEWBORNTOWN (09911) shares have surged 231% year-to-date. The company's current valuation stands at 10x price-to-earnings ratio for the next 12 months and 0.5x PEG ratio, compared to Chinese internet peers' average of 16.5x P/E and 1.2x PEG, and US peers' average of 24x P/E and 1.5x PEG.

The firm raised its target price for NEWBORNTOWN from HK$12.2 to HK$16.2, corresponding to 17x and 14x P/E ratios for fiscal years 2025 and 2026 respectively, while maintaining its "Buy" rating.

The report highlighted that NEWBORNTOWN's first-half performance exceeded expectations. Revenue grew 40% year-over-year to RMB 3.18 billion, meeting forecasts, with social and innovation business revenues increasing 37% and 72% respectively.

Group gross profit surged 56% year-over-year, exceeding expectations by 10%, with gross margin reaching 55.8%, up 5.6 percentage points year-over-year. This improvement was primarily driven by the innovation business gross margin rising significantly from 55% to 74%, boosted by incremental contributions from "Alice's Fantasy Adventure," while social business gross margin increased 3.8 percentage points year-over-year to 54%.

Adjusted operating profit and net profit grew 51% and 137% respectively year-over-year, surpassing expectations by 13% and 23%, benefiting from prudent cost control, operational leverage effects, and minority stake acquisitions.