Investment Rating - The investment rating for the company is "Buy" with a target price of 12.11 HKD, maintaining the rating from previous assessments [4]. Core Insights - The company's revenue from imaging and design business continues to grow, with a year-on-year increase of 45.2% to 1.351 billion RMB in the first half of 2025. Advertising revenue also saw a growth of 5.1% to 434 million RMB, together accounting for 98% of total revenue [1][10]. - The overall gross margin improved by 4.9 percentage points to 73.6%, and the adjusted net profit attributable to shareholders increased by 71.34% to 470 million RMB, aligning with voluntary announcement expectations [1][12]. - The company is focusing on AI-enabled applications in imaging and design, enhancing its product matrix to meet diverse creator needs, and has launched the AI design agent "RoboNeo" to innovate productivity tools [3][10]. Summary by Sections 1. Imaging and Design Core Business Optimization - The imaging and design product revenue is on a continuous rise, with a strategic adjustment in the beauty and other business sectors. The revenue from imaging and design reached 1.351 billion RMB, while advertising revenue was 434 million RMB, making up 98% of total revenue [1][10]. - The company is leveraging AI capabilities to enhance product offerings, focusing on both consumer and business segments, including KOLs and small enterprises [10]. 2. Overseas Strategy and Productivity Tool Layout - The company has seen a significant increase in Monthly Active Users (MAU), with an 8.6% year-on-year growth, reaching 280 million. The number of subscription users rose by 42.5% to 15.4 million, with a subscription penetration rate of 5.5% [2][15]. - The MAU in the domestic market grew by 5.2% to 182 million, while overseas MAU increased by 15.7% to 98 million, driven by localized strategies and collaborations with local KOLs [16]. - The productivity tools are entering a growth phase, with a 90% year-on-year increase in MAU and even faster growth in paid users [16].

Investment Rating - The investment rating for the company is "Buy" (maintained) [4] Core Insights - The company reported a revenue of 1.82 billion RMB for H1 2025, representing a year-on-year growth of 12.3%, and an adjusted net profit of 470 million RMB, which is a 71.3% increase [7] - The company has initiated a mid-term dividend, distributing 0.045 HKD per share [7] - The company is focusing on core business areas, with significant growth in paid user numbers and improvements in profitability [7] Financial Data and Profit Forecast - Revenue projections are as follows: - 2023: 2,696 million RMB - 2024: 3,341 million RMB - 2025E: 3,899 million RMB - 2026E: 4,792 million RMB - 2027E: 5,628 million RMB - Year-on-year growth rates for revenue are projected at 29% for 2023, 24% for 2024, 17% for 2025, 23% for 2026, and 17% for 2027 [3] - Adjusted net profit forecasts are as follows: - 2023: 368 million RMB - 2024: 586 million RMB - 2025E: 942 million RMB - 2026E: 1,330 million RMB - 2027E: 1,685 million RMB - Year-on-year growth rates for adjusted net profit are projected at 233% for 2023, 59% for 2024, 61% for 2025, 41% for 2026, and 27% for 2027 [3] User Growth and Market Performance - The company reported a total MAU of 280 million for H1 2025, with a year-on-year growth of 8.5% [7] - The number of paid users reached 15.4 million, a 42% increase year-on-year, with a net increase of 2.8 million users [7] - The company’s focus on productivity tools and overseas growth is yielding positive results, with overseas MAU growth at 15.3% [7] Business Structure and Profitability - The company has seen a 45% increase in revenue from imaging and design products, which now account for 74% of total revenue [7] - The overall gross margin is reported at 74%, with adjusted net profit margin at 26% [7] - The company is experiencing scale effects, with operating expenses growing at a slower rate than core business revenue [7] Management and Governance - The chairman of the company has increased his shareholding by acquiring 700,000 shares, maintaining a consistent trend of share accumulation since 2018 [7] - The company is viewed as a strong player in AI applications, with improvements in governance and product capabilities [7]

Core Viewpoint - The company has frequently launched new AI features in the first half of the year, driving significant growth in core C-end product downloads, especially in overseas markets [1][5] - The introduction of the AI agent product RoboNeo aligns with the trend of AI agent applications, providing growth potential for long-term ARPPU [1][5] - The company maintains a positive outlook on AI-driven operational data and performance growth [1][5] Financial Performance - In the first half of 2025, the company achieved revenue of 1.82 billion yuan, a year-on-year increase of 12.3%, with the imaging and design product business generating 1.35 billion yuan, up 45.2% [4] - Adjusted net profit attributable to the parent company reached 460 million yuan, a year-on-year increase of 71.3%, meeting the upper limit of performance forecasts [4] - Gross margin improved significantly to 73.6%, an increase of 8.7 percentage points, primarily due to the higher revenue share from high-margin imaging and design products [4] User Engagement Metrics - The company reported a total MAU of 280 million as of June 2025, a 6.7% increase from December 2024, with domestic MAU at 182 million (up 6.2%) and overseas MAU at 98 million (up 3.7%) [2][3] - The paid membership reached 15.4 million, with a payment rate of 5.5%, an increase of 0.8 percentage points from December 2024 [2][3] AI Product Development - The AI agent product RoboNeo entered the testing phase for C-end users by the end of June, achieving over one million MAU without cross-promotion from other Meitu products [2] - Future integration of RoboNeo into other Meitu products is anticipated as the product matures [2] Strategic Partnerships - The collaboration with Alibaba is progressing in three main areas: model cooperation, e-commerce integration, and cloud service collaboration [3] - The partnership aims to enhance product iteration speed and meet the growing computational demands of AI applications [3] Dividend Announcement - The company plans to distribute an interim dividend of 0.45 HKD per share, totaling approximately 206 million HKD, which represents about 40% of the adjusted net profit for the first half of 2025 [4]

Core Viewpoint - Meitu has successfully revived itself after a period of decline, with its stock price rising from a low of 0.6 to 10, showcasing a significant turnaround in its business performance [1]. Group 1: Strategic Adjustments - Meitu has narrowed its operational focus, honing in on product quality and user experience, particularly in the AI era [2]. - The company's previous attempts to diversify into smartphones and e-commerce were deemed unsuccessful, leading to a lack of growth narrative and a plummet in stock prices [3][4]. - CEO Wu Xinhong emphasized the importance of aligning strategy with capabilities, acknowledging past missteps in overextending the company's ambitions [5][6][9]. Group 2: Product Development and User Engagement - Meitu has rediscovered its creative potential through two main strategies: grounded demand insights and scalable engineering capabilities [14]. - The launch of the design agent product "RoboNeo" has sparked interest, demonstrating the company's ability to tap into user trends effectively [15][18]. - The company has adopted a user-centric approach, allowing users to drive product development and identifying opportunities through social media engagement [23][24]. Group 3: Financial Performance and Growth Metrics - Meitu's monthly active users (MAU) reached 280 million by June 2025, with a notable 15.3% growth in international markets, indicating a shift towards overseas user acquisition [50][52]. - The subscription user count surged to approximately 15.4 million, marking a 42% year-on-year increase, with the subscription penetration rate rising to 5.5% [56][57]. - The company has seen a significant increase in its paid user base, with the penetration rate rising from 0.7% in 2020 to 5.5% in 2025, reflecting a robust growth trajectory [58][59]. Group 4: Future Growth Potential - Meitu's future growth is expected to hinge on two key areas: productivity tools and globalization, with a focus on enhancing revenue from productivity applications [77]. - The company is actively expanding its presence in overseas markets, establishing offices in regions like the US and Australia, and prioritizing international product development [74]. - The potential for higher average revenue per user (ARPU) in international markets presents a significant opportunity for Meitu, as evidenced by comparisons with competitors like Canva [70][71].