Adjusted net profit of 370 million yuan in 2023, up 233.2% year on year, Meitu achieved revenue of 2.70 billion yuan, yoy +29.3%, GAAP net profit of 380 million yuan, yoy +301.8%. Expense control results were remarkable. The total cost rate for sales, management, and R&D in 2023 was 50.6%, yoy-9.9pct. Non-GAAP net profit of 370 million yuan, yoy +233.2%, close to the upper limit of the profit forecast guideline. Empowered by AI, the company's performance continues to be realized. We forecast the company's 24-26 revenue of 36.9/47.9/5.73 billion yuan (24-25 years ago value: 37.3/4.82 billion yuan), yoy +37.0%/29.6%/19.8%, adjusted net profit for 24-26 of 6.5/9.9/1.27 billion yuan (previous value: 6.5/1.02 billion yuan 24-25 years ago), yoy +75.4%/53.6%/27.9%. According to the closing price on March 15, the 24-26 PE is 34.9/19.9/12.9x, respectively. Considering the company's AIGC productivity scenario, it will usher in rapid growth, with a dividend payout ratio of 40.2% in '23, and strong shareholder returns. 32 times PE will be given in 24 years, with a target price of HK$5.07, maintaining a “buy” rating.
AI-driven subscription penetration increased, and the video and design product performance continued to deliver revenue of 1.33 billion yuan in Meitu's video and design product business in 23 years, yoy +52.8%, mainly due to the rapid increase in subscription penetration driven by generative AI technology. By the end of 23, Meitu had 250 million monthly active users, yoy +2.6%, of which the number of users in the productivity scenario reached 17.7 million, yoy +74.3%, while the total number of paid subscribers reached 9.11 million, yoy +62.3%, and the subscription penetration rate reached 3.66%; the beauty solutions business achieved revenue of 570 million yuan in 23 years, yoy +29.1%, mainly due to the growth of cosmetics supply chain management services; the advertising business achieved revenue of 760 million yuan, yoy +20.5% in 23 years, as the company moved towards a subscription-based business model With an inclination, the advertising business will show a steady growth trend.
AI engines continue to be empowered, expanding the boundaries of productivity scenarios
Meitu's core is driving productivity scenarios, strengthening the underlying capabilities of AI models and speeding up design workflow integration. Meitu Design Office achieved revenue of 1 million yuan in 2023, yoy +229.8%, and won first place in the FMCG Beauty and Home Appliance Dual Circuit in the “2023 Taobao Tmall Open Ecology Challenge”. At the same time, Meitu continues to expand the application boundaries of productivity scenarios. The MV model went through 4 iterations in 2023, expanding from image generation to video generation; and acquired the designer platform Cool in February '24. We believe that Meitu is expected to continue to grow in performance by focusing on precise positioning of vertical scenes and continuous improvement of its own capabilities.
The pace of globalization is more clear, and a broad market opens up room for imagination
Meitu has accumulated rich localization and product experience in the past. As its globalization strategy becomes more clear, it is expected to open up new spaces for imagination. Currently, Meitu has deployed video products in 195 countries and regions around the world. In 2023, Meitu accounted for 31% of users in countries other than mainland China, accounting for more than 50% of revenue, which shows that overseas users have higher ARPU per capita and strong potential for paid subscriptions. By further expanding market share through multiple aesthetic and localized marketing methods, we believe Meitu's global strategy can open up a new growth curve.
Risk warning: AI computing power is insufficient; large image models are not progressing as expected; competition within the industry is increasing.