Core Insights - Meitu's revenue for the first half of 2025 reached 1.8 billion yuan, a year-on-year increase of 12.3%, driven by a 45.2% surge in imaging and design product revenue to 1.35 billion yuan, resulting in a 27.3% increase in overall gross profit [1] - The adjusted net profit attributable to shareholders grew by 71.3% year-on-year to 467 million yuan, indicating strong financial performance despite a high base [1] - The company has transitioned from an internet application company to an AI application company, with AI penetration in its products reaching approximately 90% [1][3] AI as a Growth Driver - AI is viewed as the primary driver of Meitu's current growth, with features like "AI dressing" and "AI flash" generating significant user interest and increasing the paid subscription penetration rate to 5.5% [3] - The launch of RoboNeo, an intelligent product capable of generating logos, posters, videos, and interior design sketches based on user instructions, has quickly gained traction, amassing millions of monthly active users [3] - Meitu's strategy focuses on deepening its presence in "vertical scenarios," such as the "Kaipai" tool for video production, which has successfully captured market demand by simplifying complex tasks [3][4] Business Model and Market Strategy - The company emphasizes a focused approach by identifying under-served scenarios and launching precise products, allowing for rapid market validation and iteration [4] - Meitu is particularly attentive to the e-commerce sector, leveraging high digitalization levels to offer AI automation solutions, thus positioning itself as a service provider to sellers [4] - The company aims to expand its exploration beyond e-commerce into broader commercial scenarios, maintaining its identity as an AI application company focused on imaging and design [4] Global Expansion and Localization - As of June 30, 2025, Meitu's global monthly active users reached 280 million, with a year-on-year growth of 8.5%, and 98 million users outside mainland China, reflecting a 15.3% increase [5] - The company's growth is attributed to both AI technology advancements and a localized strategy that tailors products to regional user preferences [5] - Meitu's approach to global markets varies, with Southeast Asia favoring lifestyle and social media products, while the U.S. and Europe lean towards productivity applications [5][6] Competitive Edge and Challenges - Meitu's competitive advantage lies in its aesthetic capabilities, supported by a team of over a hundred designers who continuously research design trends [6] - The company acknowledges challenges in understanding cultural needs in various countries, particularly in Western markets, which will be a focus for future efforts [6]

Core Viewpoint - The focus on AI applications has become a key highlight in the secondary market, with Meitu Company reporting significant revenue and profit growth driven by AI integration in its products [1][2]. Financial Performance - Meitu's total revenue for the first half of 2025 reached 1.8 billion RMB, marking a year-on-year increase of 12.3% [1]. - The adjusted net profit attributable to equity holders was 467 million RMB, reflecting a substantial year-on-year growth of 71.3% [1]. - The core business of imaging and design products contributed over 70% of total revenue, amounting to 1.35 billion RMB, with a year-on-year growth exceeding 45.2% [2]. Business Model Transformation - Meitu has shifted its business model from primarily advertising to a subscription-based model, with paid subscription users reaching 15.4 million and a penetration rate of approximately 5.5% as of June 30, 2025 [2][3]. AI Application and Product Development - The company positions itself as an AI application company focused on imaging and design, with AI penetration in its products reaching 90% [1][3]. - Meitu has developed a suite of AI productivity tools, including Meitu Design Studio and Meitu Kaipai, targeting professional users such as e-commerce sellers and video creators [4][6]. Global Market Expansion - As of June 30, 2025, Meitu's global monthly active users reached 280 million, with 98 million users outside of mainland China, representing a year-on-year growth of 15.3% [7]. - The company's globalization strategy has shown positive results, with localized product adaptations enhancing user engagement in various markets [7]. Future Growth Potential - The global image productivity tools market is projected to reach $91 billion by 2027, indicating significant growth opportunities for Meitu in this sector [5]. - Meitu aims for revenue and profit from productivity tools to exceed half of its total income in the near future, driven by the high growth potential in this segment [6]. Investment Outlook - International investment institutions, such as UBS, highlight the contribution of overseas markets and productivity tools to Meitu's value reassessment [8]. - Citic Lyon's report has raised the adjusted net profit forecasts for Meitu for 2025 and 2026 by 15% and 20%, respectively, due to accelerated growth in paid subscriptions and strong overseas market performance [8].

Core Insights - Meitu's total revenue for the first half of 2025 reached 1.8 billion yuan, representing a year-on-year growth of 12.3%, while adjusted net profit attributable to the parent company was 467 million yuan, up 71.3% [1] - The growth in revenue and net profit is primarily driven by breakthroughs in AI applications, an increase in global paid subscription users, and rapid growth in subscription-based imaging and design product revenues [1] Revenue Structure - Revenue from imaging and design products amounted to 1.35 billion yuan, a year-on-year increase of 45.2% [1] - Advertising revenue was 430 million yuan, reflecting a year-on-year growth of 5% [1] - Revenue from beauty industry solutions was 30.1 million yuan, while other business revenue was 6.2 million yuan [1] User Growth - As of June 30, 2025, Meitu's global monthly active users reached 280 million, an increase of approximately 8.5% year-on-year [1] - Monthly active users outside mainland China reached 98 million, growing by 15.3% and accounting for 35% of total monthly active users [1] - The number of paid subscription users reached approximately 15.4 million, a historical high with a year-on-year growth of over 42% [1] Strategic Partnerships - In May, Meitu received a strategic investment of $250 million in convertible bonds from Alibaba, with ongoing collaboration expected to enhance e-commerce capabilities [2] - Plans include launching an "AI fitting" feature to improve online shopping experiences by combining Meitu's AI capabilities with Alibaba's clothing resources [2] Product Innovation - Meitu launched the AI Agent product RoboNeo in July 2025, which has already surpassed one million monthly active users within a month of launch [2] - The company has transitioned from a mobile internet company focused on imaging to an AI application company, with an AI penetration rate of approximately 90% across all products [2] Market Strategy - Analysts believe that Meitu's ability to drive product growth and commercial monetization through AI innovation is supported by its large user base and scalable R&D capabilities [3]

Core Viewpoint - Meitu has emerged as a "star company" in the Hong Kong stock market this year, with a market capitalization increase of nearly HKD 38.5 billion, entering the HKD 50 billion market cap club [2][3] Group 1: Shareholder Actions - Former chairman Cai Wensheng reduced his stake in Meitu, cashing out over RMB 1.1 billion this year, bringing his ownership down to 11.94% [2][9][10] - Cai Wensheng has shifted focus to the Web3 sector after resigning as chairman in 2023 [2][11] Group 2: Financial Performance - Meitu's adjusted net profit for the first half of 2023 is expected to grow by 65% to 72% year-on-year, driven by a rise in paid subscription users for its core "image and design products" [4] - For the full year 2024, Meitu reported revenue of RMB 3.341 billion, a year-on-year increase of 23.9%, with the image and design products segment growing by 57.1% [7][8] Group 3: Strategic Partnerships - Meitu partnered with Alibaba, which conditionally agreed to subscribe to USD 250 million in convertible bonds, potentially acquiring up to 6.85% of Meitu's shares [4] - The partnership includes a commitment for Meitu to purchase cloud services worth RMB 560 million from Alibaba over three years [4] Group 4: Market Performance - Following the announcement of the partnership with Alibaba, Meitu's stock price surged approximately 19% on the first trading day [5] - As of August 8, 2023, Meitu's stock price was HKD 11.19 per share, with a total market capitalization of HKD 51.1 billion [5]

Core Viewpoint - Meitu, once considered a "tear of the times" due to continuous losses and business retreats, has managed to turn around its fortunes through AI, projecting a net profit growth of approximately 65% to 72% year-on-year for the first half of 2025 [6][8]. Group 1: Financial Performance - In 2024, Meitu achieved a profit of 3.3 billion, with monthly active users reaching 266 million, marking it as one of the first domestic applications to profit from AI [6]. - The company's revenue increased from nearly 2.1 billion in 2022 to 2.7 billion in 2023, with net profit rising by 233.2% to 370 million [8][9]. - By 2024, net profit is expected to further increase to 586 million [8]. Group 2: AI Integration - Since late 2022, Meitu has launched a series of AIGC products, forming a three-layer architecture that includes a visual model, AI open platform, and various user-facing applications [9][11]. - The introduction of AI features has significantly boosted user engagement and revenue, with the design studio generating over 200 million in revenue in 2024, doubling year-on-year [9][12]. Group 3: Business Model Transformation - Meitu's revenue sources have shifted, with online advertising previously accounting for 76.9% in 2019, now being surpassed by VIP subscription services, which made up 37.5% of revenue in 2022 [11][12]. - The number of paid subscription users increased from 9.11 million in 2023 to 12.61 million in 2024, with a penetration rate rising from 3.7% to 4.7% [12]. Group 4: Market Position and Competition - Despite a stock price increase of over 300% in 2023, Meitu's market capitalization remains less than one-sixth of Figma's, indicating a need for improved user payment willingness and commercial stickiness [7][23]. - Meitu's AI tools are primarily focused on lightweight applications, lacking the depth of competitors like Figma and MasterGo, which cover full-process creation [11][25]. Group 5: Future Growth Potential - Meitu aims to expand into B-end productivity scenarios, with tools for content creation and commercial design, targeting a new growth curve [13][12]. - The company has formed a strategic partnership with Alibaba, which may help penetrate the B-end market and transition from a "traffic player" to a "value platform" [26].

Investment Rating - The industry rating is "Outperform the Market" with expectations for the overall industry performance to surpass the market in the next six months [14]. Core Insights - The acceleration of large model iterations both domestically and internationally is expected to foster a prosperous AI application ecosystem, particularly in multi-modal applications and AI Agents [2][3]. - The report highlights that 2025 is anticipated to be a pivotal year for the commercialization of AI multi-modal applications and AI Agents, with significant advancements expected in these areas [3]. Summary by Sections Domestic Developments - On July 28, Zhiyu released its flagship model GLM-4.5, achieving state-of-the-art performance in 12 benchmark tests across reasoning, programming, and agent capabilities [1]. - Alibaba launched the video generation model Tongyi Wanshang Wan2.2, which is the first in the industry to utilize a Mixture of Experts (MoE) architecture, featuring a total parameter count of 27 billion and an activation parameter count of 14 billion, resulting in approximately 50% savings in computational resources [1]. International Developments - Google DeepMind introduced Genie 3, a third-generation universal world model capable of real-time interaction and enhanced memory, which is expected to accelerate the transition of models to application layers [2]. - Anthropic released Claude Opus 4.1, achieving a score of 74.5% on the SWE-Bench Verified, indicating significant improvements in programming capabilities and efficiency in handling complex multi-step problems [2]. - OpenAI reintroduced two open-weight language models, GPT-OSS-120B and GPT-OSS-20B, supporting various reasoning intensities and designed for personal devices [2]. Application Focus - The report suggests focusing on the commercialization progress of AI multi-modal applications and AI Agents, with notable advancements in areas such as image and video generation, where companies like Meitu and Kuaishou are leading [3][6]. - The AI Agent sector is also highlighted, with companies like Kingdee International and Maifushi making strides in developing enterprise-level AI solutions [6]. Related Companies - Key companies to watch include Alibaba, Baidu, Tencent, Meitu, Kuaishou, Kingdee International, and Maifushi, among others, which are positioned to benefit from advancements in AI technologies [6].

Group 1 - The report indicates that the Hong Kong stock market is in an upward trend with a solid bottom, driven by improved investor sentiment and increased trading volume, particularly from institutional investors [1][2][3] - There is a notable shift towards high-dividend stocks and technology stocks, which are expected to provide momentum for the overall market [1][2] - Concerns about rising overseas risks, particularly related to the appreciation of USD assets and the impending deadline for tariff negotiations, are highlighted [1][2] Group 2 - The report expresses optimism about AI technology, noting strong capital expenditure in US tech stocks and the potential for new AI models in China to boost the tech narrative [2][3] - High-dividend stocks are favored due to the nature of incremental capital and their comparative advantage over A-shares, alongside low funding costs in Hong Kong [2][3] - Investors are expected to focus on sectors with strong performance and undervaluation, such as innovative pharmaceuticals, during the earnings season [2][3] Group 3 - The report lists the top ten recommended stocks, including Meitu, Kuaishou, and various pharmaceutical companies, with detailed financial metrics such as market capitalization and PE ratios [3][8][79] - Specific investment recommendations for each stock are provided, emphasizing growth potential driven by AI applications, strategic partnerships, and market positioning [11][18][23][28][37][48][62][72] Group 4 - The report outlines key assumptions and driving factors for each recommended stock, such as user growth, product performance, and market conditions [13][19][24][30][38][42][49][56][68][74] - Unique insights into the companies' competitive advantages and market strategies are presented, indicating potential for significant growth and valuation improvements [15][20][25][32][39][45][60][69][76]

Investment Rating - The report assigns a "Buy" rating for Meitu Company (1357.HK) [13] Core Insights - Meitu Company has successfully transformed from a traffic-based business model to a subscription-based model, leveraging its strong aesthetic know-how and technological foundation [3][9] - The company has experienced three technological transformations: from PC internet to mobile internet, and now to the AI era, which has enhanced its product capabilities and user engagement [9][20] - Meitu's growth strategy focuses on three main lines: globalization, expansion of productivity tools, and continuous investment in AI [11][20] Summary by Sections Company Overview - Founded in 2008, Meitu has evolved through significant technological changes, initially launching the PC version of Meitu Xiuxiu, which simplified photo editing for users [20] - The company shifted its focus back to software tools and began transitioning from a traffic monetization model to a subscription model starting in 2018 [9][20] Competitive Advantages - Meitu's strong channel capabilities and accumulated user aesthetic recognition have allowed it to maintain a leading position in the competitive beauty app market [10][57] - The company has built a robust product matrix that includes both lifestyle and productivity tools, with flagship products like Meitu Xiuxiu and BeautyCam leading their respective categories [27][93] AI Integration - All of Meitu's products have integrated AI capabilities, which have driven new growth in key metrics such as monthly active users (MAU) and payment rates [9][11] - The launch of the MiracleVision AI model in 2023 has provided a foundation for enhancing the AI capabilities across Meitu's product ecosystem [66] Market Position - Meitu holds a dominant market share of approximately 55.96% in the photo editing software sector, significantly ahead of its closest competitor [67] - The company has successfully expanded its user base internationally, particularly in Southeast Asia, where its products have gained substantial traction [93][104] Financial Performance - The subscription revenue has become a major pillar of Meitu's total income, with the subscription rate doubling from the initial phase of the transition [33][39] - The gross margin has improved significantly, rising from 15% to 69% by the end of 2024, reflecting the successful shift away from low-margin hardware businesses [39][41]

Investment Rating - The report assigns a rating of "Buy" for the company [1]. Core Insights - The company is experiencing high growth in its imaging product business, driven by AI capabilities and a successful global expansion strategy [2][10]. - The projected revenue for 2024 is 3.34 billion RMB, representing a year-on-year increase of 23.9%, with a gross margin of 68.7% [10]. - The company has a total MAU of 266 million as of December 2024, with a significant increase in paid subscription users [10]. Financial Summary - Total revenue is expected to grow from 2.696 billion RMB in 2023 to 6.013 billion RMB by 2027, with a compound annual growth rate (CAGR) of approximately 19% [4]. - Net profit is projected to increase from 378 million RMB in 2023 to 1.302 billion RMB in 2027, reflecting a substantial growth trajectory [4]. - The company’s PE ratio is expected to decrease from 40.00 in 2023 to 37.23 in 2027, indicating a potential increase in valuation [4]. Business Segment Projections - The imaging and design products segment is anticipated to generate revenue of 2.088 billion RMB in 2024, with a year-on-year growth of 57.1% [14]. - The beauty solutions segment is expected to decline, with revenues projected to decrease by 32.4% in 2024 [14]. - Advertising revenue is forecasted to grow steadily at 10% annually from 2024 to 2027 [14]. User Growth and Engagement - The company aims to increase its global paid user base to 15.76 million by 2025, with a subscription penetration rate of 5.9% [13]. - The average annual revenue per subscription user is projected to rise gradually, reaching 215 RMB by 2027 [13]. - The company has launched several AI-driven features, enhancing user engagement and expanding its product offerings [10][13]. Strategic Partnerships - The company has secured a $250 million convertible bond investment from Alibaba, which will facilitate strategic cooperation in e-commerce, AI, and cloud computing [10][13]. - Alibaba will prioritize promoting the company's AI e-commerce tools on its platforms, providing essential technical support [10].

Core Viewpoints - The company is expected to achieve better-than-expected performance growth in the first half of 2025, driven by AI's effective acceleration of the payment rate and significant growth in overseas downloads [1][2] - Key areas to monitor include the Q4 holiday season for C-end AI entertainment features and the progress of B-end collaboration with Alibaba [1] Company Product Development - The company's imaging and design AI Agent RoboNeo has recently entered the testing phase for C-end users, offering features that compete with Meitu and Wink for C-end and Meitu Design Studio for B-end [2] - The integration of AI into core products is anticipated to enhance payment rates and solidify the company's leading position in the market [2] Financial Projections - The adjusted net profit for the company is projected to be 825 million, 1.126 billion, and 1.463 billion yuan for 2025, 2026, and 2027 respectively, with year-on-year growth rates of 40.78%, 36.50%, and 29.91% [2] - The price-to-earnings ratio corresponding to the closing price on July 23, 2025, is expected to be 54.16, 39.68, and 30.54 times for the respective years [2]