Zheshang: Maintaining a "buy" rating on MEITU (01357) with AI technology empowering dividends.

Zheshang released a research report stating to maintain a "buy" rating for MEITU (01357). The bank predicts that the company's revenue for 2025-2027 will be 4.185, 5.281, and 6.493 billion yuan respectively, with net profit attributable to shareholders of 0.964, 1.334, and 1.661 billion yuan respectively. The bank uses a relative valuation method to value the company, taking into account the valuation levels of comparable companies and giving a certain valuation discount considering the valuation differences between different markets, giving the company a 40x PE for 2026, corresponding to a target market value of 53.4 billion Hong Kong dollars and a target price of 11.6 Hong Kong dollars, based on the closing price on February 24, 2026, the current price corresponds to a 17x PE for 2026. Zheshang's main points are as follows: Market expectations AIAgent is reshaping work patterns and workflows, and there is a divergence in the market regarding whether traditional tool software will be replaced by AI technology, with concerns about the company's long-term barriers and the sustainability of performance growth. The company's product positioning is as a creation platform rather than simple procedural software, benefiting from AI technology The company's long-term moat lies in its aesthetic accumulation (know-how) in the beauty retouching scene, its large and stable user base (traffic entry point), and its unique workflow paradigm (user stickiness). These barriers are expected to drive the company to become an innovator in the field of AI+ beauty retouching, accelerate the increase in the company's paid penetration rate and the exploration of new markets, thereby driving continuous performance growth for the company. Driver one: Increase in paid users Considering that paid users = MAU paid subscription penetration rate, the increase in the company's paid user count mainly comes from the expansion of overseas markets, bringing about an increase in MAU; boosted by AI technology, user experience has significantly improved, and business productivity tool users are more willing to pay, resulting in an overall increase in paid subscription penetration rate. From a tracking and verification perspective, according to the company's latest release of the 2025 performance forecast, the company's global paid subscription user count has rapidly increased in 2025, with the growth rate of paid subscription users from international markets surpassing that of the mainland Chinese market, confirming the effectiveness of the company's globalization strategy. Driver two: Increase in ARPPU ARPPU measures the average revenue per paid user, considering that total revenue = number of paid users ARPPU, the increase in ARPPU is expected to further drive the revenue growth of the company. The company's ARPPU has maintained an upward trend since 2021, and the bank expects ARPPU to continue to steadily increase in the future, mainly due to the higher subscription prices for overseas users; business users having higher payment capabilities and willingness to pay. Risk warning Risk of AI intrusion, overseas or B-end business expansion falling short of expectations, intensifying market competition