CICC: Maintains MEITU (01357) "Outperform" Rating, Target Price of 6.6 Hong Kong Dollars.

Zhongjin released a research report stating that it maintains a "outperform industry" rating for MEITU (01357) with a target price of 6.6 Hong Kong dollars, representing a 40% upside potential from the current stock price, corresponding to 22 times the 26 non-IFRS P/E, while the current stock price trades at 16/13 times the 26 and 27 non-IFRS P/E. The company announced its FY25 performance, with continuous operating revenue increasing by 29% to 3.9 billion yuan, and adjusted net profit attributable to shareholders increasing by 65% to 970 million yuan, outperforming the bank's expectations. This was mainly due to the increase in the proportion of high-margin subscription business and cost reduction and efficiency improvement. The bank maintains its revenue and profit forecast for 26, and introduces new revenue and adjusted net profit forecasts for 27 of 5.6 billion yuan and 1.4 billion yuan. In FY25, the company's subscription revenue increased by 42% to 3 billion yuan, with overall MAU increasing by 4% to 276 million, and paying users increasing by 34% to 16.91 million. The subscription gross profit margin remained stable, increasing by 1.4 percentage points to 6.1%. The company expects to control third-party API costs through model container strategies (costs account for only single digits). The bank forecasts that the gross profit margin will stabilize at around 73% based on the 25-year foundation. ARPU of the company increased compared to the previous year, mainly driven by breakthroughs in overseas markets and productivity product commercialization: 1) International market revenue increased by 37%, accounting for 38% of the total revenue, with Europe, America, and other high-ARPU regions becoming important sources of new paying users; 2) The proportion of productivity tools revenue increased to 19%, with productivity paying users increasing by 67% to 2.16 million, and the payment rate increasing by 3 percentage points to 9%, driven by the success of Meitu Design Studio and Opai. Considering the continued growth trend of payment rates, the bank predicts that the subscription revenue for 26 may increase by more than 30%. The company has built a multi-role "AI team" around the high-value scenes of e-commerce material production and short-form video, and products have been implemented: Meitu Design Studio has deployed four major Agent capabilities; Opai Agent user penetration rate reached 11%; RoboNeo reached the top of the application chart in 26 countries and regions. The company also encapsulated image skills through the OpenClaw ecosystem to further reduce the barrier to creation and build platform-level reuse capabilities. The company expects that the long-term growth space of ARPU may be enhanced by Token consumption based on Agent.