HK Stock Market Move | MEITU (01357) rose nearly 7% in the early trading, with expected annual net profit growth of up to 60%. AI cost reduction is expected to improve subscription revenue gross margin.

MEITU (01357) rose nearly 7% in the morning session, and as of the time of writing, it has risen 4.14% to HKD 4.78 with a trading volume of HKD 534 million. On the news front, on February 7, MEITU released a profit announcement, expecting a year-on-year growth of approximately 52% to 60% in adjusted net profit for 2024. This growth is mainly attributed to the rapid growth of core business revenue in imaging and design products driven by AI technology, which has a high gross profit margin and continues to increase its share in overall revenue, driving both overall gross profit and gross profit margin to increase year-on-year. Additionally, despite a significant increase in R&D spending related to AI technology and products, the overall operating expenses increased less than the gross profit, further improving profitability. Morgan Stanley believes that with the support of DeepSeek, the lower cost of AI model inference should further improve MEITU's subscription revenue gross margin. The bank also pointed out that MEITU has benefited from overseas expansion, especially with the launch of X-design at the end of 2024. Credit Suisse noted that considering the productivity improvement brought by DeepSeek technology, it raised its revenue and profit forecast for MEITU this year and raised its target price from HKD 4.6 to HKD 5.1, maintaining a "buy" rating and believing that the company's profitability will continue to grow rapidly.