Any company that can break its inherent fate is a rare species.

Editor’s note: This article is from the micro-channel public number “brocade” (ID: jinduan006), Author: leather tripod.

Commercial evolution never ceases. Since ancient times, the waves of the Yangtze River have pushed forward waves.

Since 2021, the audio social tool Clubhouse has taken the global Internet circle by storm; the American mobile Internet social software company Match Group has invested heavily in the purchase of South Korean video broadcast brand Hyperconnect for US$1.7 billion; the Chinese company Yale Technology, which focuses on voice entertainment and social networking, is in the US circle The market continues to gain popularity, and the stock price has doubled in the past two months. All this indicates the arrival of a wave of upgrading of the global social paradigm.

From text, to pictures, to video (audio and video)-a social approach that projects 100% of the real world, it is in an important period of value discovery. This value and the basic path of market value climbing should be valued separately by Inspur.

Based on the above path, we focused on another vigorous “back wave” in the same field in the value discovery stage-Chizicheng Technology (HK:09911): Compared with Yale Technology, which is listed on the US stock market, the fundamentals of the former look Better, but the valuation is less than 1/4 of the latter.

In our opinion, there are two core reasons for this value split in Chizi City:

First, the “seal effect” of small Internet companies has long existed in the Hong Kong stock market. With changes in liquidity and value expectations, this effect is breaking down.

Second, the market’s inherent view is that Internet companies with tool origins are unlikely to become powerful. We believe that this is precisely the key point of value discovery and revaluation-companies that can break fate are more promising.

01 New wave of global social paradigm

1) Social paradigm upgrade

Fifteen years ago, people socialized on Tianya, 10 years ago people socialized on QQ and QQ space (in addition to shopping in the space, they could steal food), 5 years ago, people socialized on Weibo and Momo, today people are in Kuaishou, Social on Douyin.

The above evolution process depends on the upgrade of communication infrastructure, that is, 2G to 5G brings greater bandwidth and faster upload speed. However, the upgrading of the Weibo Yinmomo paradigm (including the two parts of the method fast hand thods and the philosophy philosophy) is often overlooked.

From the perspective of disassembly, from Tianya to Kuaisha:

◆Method: The path of “plain text” → “text + picture” → “text + picture + video” → “pure video” is upgraded, and the web page classification directory is upgraded to the display mode recommended by the algorithm.

◆Concept: From just a few words to 100% projection of the real world and personal status, the completeness and richness of information is greatly improved.

The paradigm change will inevitably bring forth new values, real images and direct feelings bring:

1. More useThe number and duration of user usage drive an exponential increase in the value of advertising;

2. The trust bonus promotes an exponential increase in live broadcast e-commerce transactions;

3. The visualization of knowledge/skills makes the payment of rewards and subscription value-added services increase exponentially, and so on.

So you can see that Tianya has never really become a climate. Tencent Holdings, where QQ is located, has a market value of more than 10 billion U.S. dollars a decade ago, Weibo has a market value of up to 32.1 billion U.S. dollars, Momo has a market value of up to 21.5 billion U.S. dollars, and Kuaishou has a market value of 61 billion U.S. dollars. The initial and latest market value exceeds US$170 billion (HK$1.32 trillion).

The Chizi City that this article focuses on is in a wave of global social paradigm upgrades. Its main social products are Yiyo, MICO, and YoHo. These social products will be introduced one by one later.

2) Core assets

The first thing that needs to be clearly emphasized is that the current tense is in the value discovery stage of the global social paradigm upgrade.

Match Group (NASDAQ:MTCH) played a big deal in February this year. According to Nikkei reports, Hyperconnect, a South Korean video social company invested by SoftBank, stated on February 10, 2020 that it will be acquired by the American stranger social giant Match Group (currently worth $42 billion) for $1.7 billion. The former is the largest acquisition in history.

Hyperconnect was established in 2014, and its core business is Azar, a one-to-one video social application. The company’s revenue in 2020 is more than 200 million U.S. dollars, an increase of 50% over 2019, and it has achieved profitability.

Baidu announced in late October 2020 that it will acquire YY’s domestic business for USD 3-4 billion. According to YY’s market value of approximately US$7.2 billion at the time, deducting cash, holding stock market value in Huya, and overseas assets with BIGO as the core, this transaction gave a certain premium.

The reasons for Baidu’s willingness to pay premiums are not difficult to understand: 1. Its own knowledge graph and search business can inject new growth potential into YY, thereby forming a synergistic effect; 2. Recognizing the value of video as a social paradigm upgrade wave.

Baidu p> is not only video social networking, audio social networking with higher information completeness and richness than images/text forms is also very popular. For example, Clubhouse, tens of thousands of people frantically asked for a code, and then completed a $100 million Series B financing. To

Not only in the primary market, the secondary market is also very optimistic about audio social networking. Yale Technology (NYSE:YALA) in the US stock market hit a new high of US$6 billion in February.

02 Chizicheng Technology VS Yale Technology

Taking the global social paradigm upgrade wave as the main line, the market’s value to Chizi City is obviously neglected-in contrast, one glanceA cartoon avatar blocking the face of the opposite sex.

Social user dimension. Yalle Technology has 5.5 million monthly active social users in Q3 of 2020 (a recently disclosed reporting period), and 4.835 million in Q2 of 2020, an increase of 14% from the previous month. Chizi City has 11.36 million monthly active social users in Q4 of 2020, and 9.1 million in Q3 of 2020, an increase of 25% from the previous quarter. The growth rate of social users in Chizi City is faster than that of Yale Technology. The latter’s current growth is mainly supported by the desktop casual game platform Yalla Ludo.

Figure 3: Yale Technology users, source: Q3 quarterly report

Revenue scale. Assuming that Yale Technology’s Q4 revenue increased by 15% from the previous month, it would be about RMB 800 million for the full year of 2020. (Note: Chizi City just issued a profit forecast in March, and its revenue in 2020 will be approximately 11.1 to 125 million yuan.)

Market value perspective. Since Yale Technology went public at the end of September 2020, its stock price has increased 6.6 times from low to high. The market value was as high as 6 billion US dollars in February 2021, and it is currently adjusted back to 3.4 billion US dollars. On the other hand, Chizi City, when its market capitalization peaked last month, was 11.5 billion Hong Kong dollars (equivalent to 1.5 billion U.S. dollars), and it is currently adjusted back to 6 billion Hong Kong dollars (equivalent to 800 million U.S. dollars).

In other words, from the perspective of potential value, social users and revenue scale, Chizi City is not inferior to Yale Technology—or even more dominant. However, the strange thing is that the market value of Chizi City is only 1/4 to 1/5 of Yale Technology.

Are there several black question marks on your head?

03 ​​”Seal” is broken

In fact, one of the most important reasons for the difference in market value between Chizi City and Yale Technology is the difference between the Hong Kong and US stock markets.

In recent years, Hong Kong stocks’ valuation of small Internet companies with small market capitalization has not been so friendly to US stocks and cannot afford valuations. There are two core reasons:

First of all, the history of Internet companies in Hong Kong stocks is still very short, and the valuations of small companies are often conservative. You know, a few years ago, there were no Internet companies in Hong Kong stocks, and Tencent was very lonely.

Until April 30, 2018, the Hong Kong Stock Exchange has amended some of the “Listing Rules” to allow biotechnology companies that have no income or profit, innovative industry companies with the same shares and different rights, and innovative industry companies that have been listed overseas to Hong Kong The stock exchange submits an IPO application.

It has only been three years since the reform of the Hong Kong Stock Exchange has been completed. Recently, there have been more Internet companies. But compared with the U.S. stock market’s acceptance of the same shares of Internet companies with different rights for decades, it looks very young.

This kind of youthfulness needs to be improved in inclusiveness. Companies with vague prospects are willing to go to the US stocks, such as long-term apartment companies whose business models have not yet worked, e-cigarette companies that are well established by Damocles, cosmetics companies driven by marketing and profitability, and videos whose profits are indefinite. Streaming media company.

It also shows that the valuation of the “future” needs to be improved. For example, the Yale Technology we mentioned above. In the past few years, social user data has actually grown very slowly. Monetization depends on increased payment (high migration costs for local tyrants) and the new desktop casual game platform Yalla Ludo. There are too many things in the face, but in the US stock market, I am more willing to believe in trends and changes, specifically, the social paradigm upgrade. The share price of Chizi City in Hong Kong stocks has been suppressed for a long time.

In addition, there are many stocks in Hong Kong stocks. People will feel innately frustrated with companies that are unfamiliar and small, see the post of greatsoup. The so-called counterfeiting and speculation of Chinese concept stocks in US stocks is a business model of short-selling institutions. Hong Kong stocks have a large number of stocks, which is a business model that has always been used by the chairman of the board.

Based on the above two reasons, we believe that the Hong Kong stocks in the past have the “seal” of small Internet companies.

But beginning in 2020, the “seal” is gradually breaking under the epidemic.

With the gradual increase of Hong Kong stock new economy companies-the listing of high-quality companies such as Ping An Good Doctor, Meituan, China Reading Group, and Kuaishou; the secondary listing of Hong Kong stocks of companies such as Alibaba, JD.com, and NetEase-a powerful transformation of the new Internet economy The company’s valuation thinking and methodology are based on Ping An Good Doctor, whose valuation is based on future expectations. Reading Group

For example, the Reading Group, although NetJingdong Reading Netease is not very good, but the future of IP derivative development is enough to make people look forward to, and the market deserves to rise. Although the profit margin of Meituan is relatively ordinary, the market believes that it is infinite. From the 157 million people with monthly income of 3000-5000 yuan that can reach the limit, it drops to the monthly income of 2000-3000 yuan. 100 million people, whether through community group purchases or other, gives a higher valuation.

As for companies with small market capitalization, there are also benchmark companies that build unique business models, such as companies with a small market value. If Chizi City’s performance can continue to grow, there is a high probability that its long-term value will be recognized by the capital market.

Also, exceptThe seal of the Hong Kong stock market is also an important reason for suppressing the value discovery of Chizi City: its tool origin.

The traditional view is that tools are not good, so Chizicheng is not. This does not take into account the dynamic development of Chizicheng (small market capitalization stocks are not covered by many people). In our view, being able to change from a tool company to a social company is precisely the long-term value of Chizi City.

04 Fateful confrontation

Chizi City was originally an overseas tool application and programmatic advertising platform. In 2013, it launched a minimalist AI desktop Solo Launcher, which was put on Google Play. Unexpectedly, it became popular in the United States after it went online. With this, he won the two awards of Google’s “Best Application” and “Top Developer”, and accumulated traffic and data of 100 million users. Later, Chizicheng became famous as an “overseas APP factory”.

But the founder Liu Chunhe clearly realized that there is no future for tools. In 2015, when he participated in an industry forum, he put forward the view that “tools must die”.

At that time, tools going to the sea were a popular track, traffic rose quickly, and cash came quickly, and Cheetah Mobile was sought after in the US stock market. Moreover, his own main business at the time was tools.

But looking back five or six years later, Cheetah is dying in the US stock market. Master Lu is the pinnacle of his debut, Cheetah Mobile, which has repeatedly failed IPOs, and a large number of tool companies have fallen, all showing that the theory of “tools must die” is correct.

This has to be said to be the fate of the tool: There are downloads but no Master Lu. The short-term needs will be solved from the bottom by companies such as Huawei and Google in the long-term.

Based on the founder’s judgment that “tools must die”, Chizi City has gradually transformed into a social direction, forming a product matrix of Yiyo, MICO and YoHo. After reviewing the development path of Chizi City in the past few years, we can clearly see the upgrade path:

  • The mobile advertising platform business has been upgraded from media procurement to a programmatic advertising platform.

  • The programmatic advertising platform guides the APP matrix from 0 to 1 billion users.

  • The APP matrix has been upgraded again from casual applications to boutique applications and even star applications (MICO and Yiyo).

It can be said that Chizi City has broken its destiny as a tool and completed the transition of life level. This is its most valuable place.

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