Summary of Meitu Company Conference Call Company Overview - **Company**: Meitu - **Industry**: Image processing and entertainment software Key Points and Arguments 1. **Response to AI Challenges**: Meitu enhances product precision and stability through image data accumulation and personal image archives, increasing user engagement to counter AI challenges [2][5][11] 2. **Market Expansion**: The company actively expands into Southeast Asia, Northeast Asia, and Western markets, collaborating with Alibaba to create new growth opportunities [2][5] 3. **Positioning**: Meitu positions itself as a lifestyle and entertainment tool rather than a pure efficiency tool, attracting users by providing enjoyment, participation, and a sense of achievement [2][5] 4. **User Engagement**: The company has a complex workflow for image editing, which includes various steps that enhance user retention and satisfaction, differentiating it from purely AI-driven solutions [2][9][10] 5. **Subscription Growth**: Since 2018, Meitu's subscription revenue has grown at a compound annual growth rate (CAGR) of 85%, with the paid user rate increasing from 0.8% in 2020 to 5.5% in the first half of 2025 [2][13] 6. **Future Projections**: By 2030, Meitu expects its monthly active users (MAU) to grow from 280 million in 2025 to 500 million, with a projected paid user rate of 13% [3][14] 7. **Revenue Forecast**: For the first half of 2025, total revenue is expected to reach 4 billion RMB, with a net profit guidance of 940 million RMB for the year [3][15][16] 8. **Valuation**: Meitu's current valuation is below 30 times earnings, but with a growth rate of over 45%, it is expected to achieve a higher valuation multiple, targeting a market value of approximately 49 billion RMB or 50 billion HKD [3][17] Additional Important Insights 1. **B2B and B2C Segmentation**: Meitu differentiates between consumer (C-end) lifestyle applications and business (B-end) productivity tools, with significant growth potential in overseas markets for C-end applications [2][11] 2. **Local Adaptation**: The company has strong capabilities in developing localized features that resonate with regional aesthetics, particularly in Northeast Asia [2][10] 3. **SaaS Market Dynamics**: The impact of AI on the software industry is complex, with B-end SaaS companies like Meitu maintaining control over data and entry points, reducing the risk of being overtaken by AI [3][5] 4. **User Experience**: The GUI (Graphical User Interface) is emphasized as more effective for high-precision tasks compared to natural language interfaces, which can be ambiguous [6][8][9] This summary encapsulates the essential insights from the conference call, highlighting Meitu's strategies, market positioning, and future growth potential in the face of evolving technological challenges.

Group 1 - Morgan Stanley increased its stake in Meitu Inc. (01357) by acquiring 9.772165 million shares at a price of HKD 7.7549 per share, totaling approximately HKD 75.7822 million [1] - Following the acquisition, Morgan Stanley's total shareholding in Meitu is approximately 229 million shares, representing a holding percentage of 5.01% [1]

Core Viewpoint - Morgan Stanley has increased its stake in Meitu Inc. to approximately 5.01% by acquiring 9.772165 million shares at a price of HKD 7.7549 per share, totaling around HKD 75.7822 million [1] Company Summary - Morgan Stanley's latest shareholding in Meitu Inc. amounts to approximately 229 million shares [1] - The increase in shareholding reflects a strategic investment decision by Morgan Stanley in Meitu Inc. [1]

Core Viewpoint - Guojin Securities has initiated a "Buy" rating for Meitu with a target price of HKD 11.73, believing that the company has significant long-term growth potential despite concerns over AI general models overshadowing its narrative [2]. Group 1: Market Concerns and Company Response - The release of Google's Gemini 3 and Nano Banana Pro has raised market fears that AI general models may disrupt the positioning and business models of application vendors like Meitu [2]. - Meitu's management has expressed confidence in their ability to leverage vertical scenarios and user experience, asserting that they possess advantages over general model companies [2]. - Meitu's founder, Wu Xinhong, stated that their products will continue to evolve alongside large models, emphasizing that general models may not meet end-to-end needs in vertical scenarios like e-commerce design [2]. Group 2: Misconceptions About Meitu Products - The report identifies four major misconceptions about Meitu products: 1. Tolerance Rate Misconception: Meitu's expertise in portrait scenarios creates a barrier due to low tolerance for human facial features and expressions [3]. 2. Aesthetic Efficiency Misconception: Automatic and one-click editing cannot replace the creative value of third-party apps in self-pleasure aesthetic activities [3]. 3. Natural Language Interaction Misconception: Fine adjustments in beauty apps are more efficiently completed through functional buttons rather than natural language [3]. 4. Point Function Misconception: Meitu's products function as a comprehensive toolbox, integrating various features to meet diverse user needs [3]. Group 3: Growth Potential - Meitu's products, including Meitu Xiuxiu, Meiyan Camera, and RoboNeo, are expanding their reach across lifestyle and productivity tools [3]. - The combination of international expansion and productivity tools is expected to initiate a second growth curve for Meitu, enhancing ARPU through AI value-added features and changes in MAU structure [3]. - The company aims to increase the payment rate for tool-based apps to over 10% by leveraging their functional depth and social attributes [3].

Core Viewpoint - Guojin Securities has initiated a "Buy" rating for Meitu with a target price of HKD 11.73, believing that the company has significant long-term growth potential despite concerns over AI models overshadowing software applications [1][2]. Group 1: Market Perception and Misconceptions - The market holds four major misconceptions about Meitu's products: 1. Tolerance Rate Misconception: Low tolerance rates in portrait scenarios create effective barriers due to the need for aesthetic alignment with user expectations [2]. 2. Aesthetic Efficiency Misconception: Automatic and one-click editing cannot replace the "creative value" of third-party apps in self-pleasure aesthetic activities [2]. 3. Natural Language Interaction Misconception: Fine adjustments in beauty apps are more efficiently completed through functional buttons rather than natural language interfaces [2]. 4. Point Function Misconception: Meitu's products function as a comprehensive toolbox for image editing, integrating various features to meet diverse user needs [2]. Group 2: Growth Potential and Strategy - Meitu's products cover both lifestyle and productivity tools, with flagship products like Meitu Xiuxiu, Beauty Camera, and RoboNeo expanding their reach [2]. - The company is expected to initiate a second growth curve through international expansion and productivity tools, enhancing ARPU by leveraging AI value-added features and changes in MAU structure [2]. - The company aims to increase the payment rate for tool-based apps to over 10% due to its functional depth and social attributes [2].

Core Viewpoint - Meitu Inc. has seen a nearly 4% increase in stock price, attributed to the global popularity of its "AI Snow Scene" feature in the Meitu Xiuxiu app, which has topped app store charts in 29 countries and regions as of November 13 [1] Group 1: Company Performance - As of the latest report, Meitu's stock price rose by 3.65% to HKD 8.52, with a trading volume of HKD 373 million [1] - The Meitu Xiuxiu app has achieved the top position in app store rankings in countries including Germany, Switzerland, Austria, Poland, Russia, Turkey, South Korea, and Kazakhstan [1] Group 2: Market Analysis - Dongfang Securities believes that Meitu will continue to benefit from advancements in underlying technology and the iterative development of AI features, enhancing its creative capabilities rather than being replaced by general-purpose models [1] - Guojin Securities asserts that tools like Meitu, which possess deep functionality and national recognition, maintain significant value in the AI era [1] Group 3: Growth Potential - The company is expected to have substantial long-term growth potential, with opportunities in overseas markets and productivity tools likely to initiate a second growth curve [1] - The combination of overseas expansion and productivity tools is anticipated to contribute to future Monthly Active Users (MAU) growth, while AI-enhanced features and changes in MAU structure may increase Average Revenue Per User (ARPU) [1] - The "functional depth and social attributes" of tool-based apps could push the payment rate ceiling above 10% [1]

Core Viewpoint - Meitu Inc. has seen a nearly 4% increase in stock price, attributed to the global popularity of its "AI Snow Scene" feature in the Meitu Xiuxiu app, which has topped app store charts in 29 countries and regions as of November 13 [1] Group 1: Company Performance - As of the latest report, Meitu's stock price rose by 3.65% to HKD 8.52, with a trading volume of HKD 373 million [1] - The Meitu Xiuxiu app has achieved the top position in app store rankings in Germany, Switzerland, Austria, Poland, Russia, Turkey, South Korea, Kazakhstan, and others [1] Group 2: Market Analysis - Dongfang Securities believes that Meitu will continue to benefit from advancements in underlying technology and the iterative development of AI features, enhancing its creative capabilities [1] - Guojin Securities asserts that tools like Meitu, which possess "functional depth and deep national recognition," will maintain significant value in the AI era [1] Group 3: Growth Potential - The company is expected to have substantial long-term growth potential, with opportunities in overseas markets and productivity tools likely to initiate a second growth curve [1] - The combination of overseas expansion and productivity tools is projected to contribute to future Monthly Active Users (MAU) growth, while AI-enhanced features and changes in MAU structure may increase Average Revenue Per User (ARPU) [1] - The "functional depth and social attributes" of tool-based apps could elevate the payment rate ceiling to over 10% [1]

Core Viewpoint - Guojin Securities initiates coverage on Meitu Inc. (01357) with a "Buy" rating and a target price of HKD 11.73, emphasizing the company's strong core value derived from its "functional depth + national recognition" in the AI era, which is difficult to disrupt [1] Group 1: Misconceptions in the Market - The market holds four major misconceptions about Meitu's products: 1. Error tolerance misconception: Scenarios involving face editing and character consistency generation have standard answers, but current multi-modal base model capabilities yield unstable results [1] 2. Efficiency in aesthetic activities misconception: Editing images is a self-pleasure activity, and while AI can solve accuracy issues, one-click editing may diminish user experience and satisfaction [1] 3. Natural language interaction misconception: The transition from command line to GUI means that functional buttons represent know-how, and the accuracy of natural language interaction is lower than the drag-and-drop interaction of Meitu's graphical interface [1] 4. Point function misconception: Meitu's products encapsulate a mature workflow in image tools, providing a comprehensive suite of features that meet user needs 100% [1] Group 2: Growth Potential and Revenue Model - The company has a broad long-term growth space, with the potential for a second growth curve driven by international expansion and productivity tools. Since launching Meitu Xiuxiu in 2008, the company has explored various business models, ultimately returning to subscription-based monetization for image editing software [2] - Subscription revenue has grown from CNY 50 million in 2018 to CNY 2.09 billion in 2024, with MAU, ARPU, and payment rate increasing approximately 2%, 25%, and 519% respectively from 2020 to 2024 [2] - Looking ahead, the combination of international expansion and productivity tools is expected to contribute to future MAU growth, while AI-enhanced features and changes in MAU structure may increase ARPU, pushing the payment rate ceiling for tool-based apps above 10% [2]

Core Viewpoint - The Hong Kong stock market is experiencing a strong performance in artificial intelligence stocks, with notable gains among several companies [2] Group 1: Company Performance - Dreamland (01119.HK) has seen an increase of over 7% [2] - Meitu (01357.HK) has risen nearly 5% [2] - Reading Group (00772.HK) and GDS Holdings (09698.HK) have both increased by over 4% [2] - Baidu (09888.HK) has also experienced a rise of over 4% [2]

Group 1 - AI application concept stocks have mostly risen, with notable increases in companies such as Innovent Biologics (6.85%), Alibaba (4.54%), Kuaishou (4.38%), Meitu (3.21%), and Yuedu Group (3.56%) [1] - Recent positive developments in the AI application field include Google's release of Gemini3 and Nano Banana Pro, which have significantly outperformed previous models [1] - Alibaba's AI assistant Qianwen App has surpassed 10 million downloads within a week of its public testing, becoming the fastest-growing AI application, outpacing ChatGPT and others [1] Group 2 - Bohai Securities notes that leading model manufacturers like Baidu, Alibaba, and Google are continuously iterating their AI large model products, intensifying global competition and accelerating technological innovation and application [2] - Domestic large models in China are making steady progress in technical iterations, successfully entering the global first tier of large models [2] - The compatibility between domestic large models and local accelerated computing chips is improving, creating a synergistic advantage for algorithm and hardware, which lays a solid foundation for large-scale implementation across various industries [2]