CICC has reaffirmed its "outperform" rating for MEITU, setting a target price of HK$6.6, which implies a 40% upside from the current share price. This valuation corresponds to 22 times the 2026 non-IFRS price-to-earnings ratio, while the current stock is trading at 16 times and 13 times the 2026 and 2027 non-IFRS P/E, respectively. The company reported its fiscal year 2025 results, with sustained operating revenue increasing 29% year-on-year to RMB 3.9 billion. Adjusted net profit attributable to shareholders rose 65% year-on-year to RMB 970 million, surpassing expectations, primarily driven by a higher proportion of high-margin subscription business and improved cost efficiency. CICC maintained its revenue and profit forecasts for 2026 and introduced new projections for 2027, anticipating revenue of RMB 5.6 billion and adjusted net profit of RMB 1.4 billion. In fiscal year 2025, MEITU's subscription revenue grew 42% year-on-year to RMB 3 billion. Overall monthly active users increased 4% to 276 million, while paying users rose 34% to 16.91 million. The gross margin for subscriptions remained stable, increasing 1.4 percentage points to 61%. The company expects to control third-party API costs, which account for only a single-digit percentage of total costs, through a model container strategy. CICC forecasts the gross margin will stabilize at around 73% based on the 2025 level. Average revenue per user improved year-on-year, mainly due to breakthroughs in overseas markets and productivity product commercialization. International market revenue grew 37%, accounting for 38% of total revenue, with high-ARPU regions such as Europe and the Americas becoming significant sources of new paying users. Revenue from productivity tools increased to 19% of the total, with paying users for these products surging 67% to 2.16 million and the paying ratio rising 3 percentage points to 9%, driven by MEITU Design Studio and KaiPai. Given the continued growth in paying ratios, CICC expects subscription revenue to increase over 30% year-on-year in 2026. The company has developed a multi-role "AI team" focused on high-value scenarios like e-commerce material production and promotional videos, with products already launched. MEITU Design Studio has deployed four agent capabilities, while KaiPai Agent has achieved an 11% user penetration rate. RoboNeo topped the app charts in 26 countries and regions. Additionally, through the OpenClaw ecosystem, the company has packaged imaging skills to lower creation barriers and build platform-level reusable capabilities. MEITU anticipates that agent-based token consumption will enhance long-term ARPU growth potential.
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