Sou Hu Cai Jing·2025-11-24 10:19Core Viewpoint - Since 2025, China's assets have shown a stable recovery, with the overseas Chinese concept stock index rising over 27%. Cheetah Mobile (CMCM.US) outperformed the index with a 38% annual increase, yet its valuation remains significantly undervalued at a market cap of only $200 million, well below its net cash of approximately $280 million as of June 30, 2025. The market has not fully recognized the company's business transformation, which features a dual business structure comprising a stable internet core and a high-growth AI and robotics segment [1]. Group 1: Fundamental Changes - In Q2 2025, Cheetah Mobile achieved its best quarterly performance in recent years, with revenue growth accelerating to 57.5% year-on-year and a continued reduction in losses, indicating a sustainable transformation driven by business structure optimization and upgraded profit models [2]. - The company reported revenues of 295 million RMB in Q2, a 57.5% increase year-on-year, with a strong growth trend supported by the synergy between its internet and AI businesses, creating a dual-driven growth model [3][5]. - The internet business generated 158 million RMB in revenue, up 38.8% year-on-year, primarily due to a successful shift from traditional advertising to subscription services, which now account for over 60% of internet revenue [5][6]. Group 2: Profitability and Cash Flow - Cheetah Mobile's GAAP operating loss in Q2 was 11.06 million RMB, a reduction of 85.7% year-on-year, indicating a clear path towards profitability. The CFO expressed confidence in overall profitability for Q3, supported by stable cash flow from the internet business and improving margins in AI and robotics [10]. - As of June 30, 2025, the company held net cash of 2.02 billion RMB, with a net cash inflow from operating activities of 360 million RMB, highlighting its strong cash generation capability and providing a solid financial cushion for ongoing investments [13]. Group 3: Valuation Assessment - Cheetah Mobile's current market cap of $200 million is significantly undervalued when considering its net cash and the potential of its dual business model. Valuation scenarios suggest substantial upside potential, with optimistic estimates reaching $2.02 billion based on industry average multiples [14][15][16]. - The valuation analysis indicates that even under conservative estimates, the company has a significant revaluation potential, driven by its stable internet business and high-growth AI segment [17]. Group 4: Market Perception and Misconceptions - The undervaluation of Cheetah Mobile is attributed to three cognitive biases: lingering historical perceptions, underestimation of the certainty in its AI and robotics business, and delayed recognition of its transformation logic [19][20][21]. - The market has yet to fully appreciate the company's successful transition to a subscription model and the profitability of its AI and robotics segments, which are expected to contribute significantly to future growth [19][20]. Conclusion - Cheetah Mobile's investment narrative has shifted from "turnaround" to "growth confirmation," with a solid cash flow from its internet business and significant growth potential in AI and robotics. The current market cap is below its net cash, indicating a strong revaluation opportunity as market perceptions adjust following the upcoming Q3 earnings report [23].