Event: On June 12, Meitu held the 3rd Video Festival to release 6 AIGC-driven products around the “Imaging and Design” AI workflow, covering commercial photography, broadcast video, e-commerce design, design services, game marketing, and video generation.
Meitu is deeply involved in AI technology and is one of the few companies that profit on a large scale through AI. AI-driven user growth: As of June 11, Meitu's global VIP membership reached a record high of 10.63 million (7.19 million in the same period in 2023, yoy +49%). 1) According to QuestMobile data, from 2020 to 2024, Meitu Xiuxiu maintained a MAU share of around 50% in the image editing circuit, maintaining the highest market share; 2) The Meitu Design Office had good market feedback. From January '22 to May '24, the number of monthly active users reached up to 17.73 million, and monthly paid users reached 930,000. Monthly gross profit gradually increased, serving nearly 2 million e-commerce sellers; 3) One year after launch, MAU reached 694,000, and monthly gross profit surpassed 1 million. AI enhances product power and drives payments: As of May '24, 87% of paid users used AI features, and 41% of paid users used generative AI in all Meitu products.
The company's gross margin reached 61% in 2023, and adjusted net profit to mother reached 370 million (yoy +233%).
Six new products have been launched, and tools reshaped by AI are expected to meet incremental demand. 1) Meitu Cloud Repair V2: It can achieve AI batch color mixing and batch refinement, the preview speed has been increased by 10 times, and an API has been opened to serve commercial photography, e-commerce and other scenarios to achieve instant transmission, instant correction, and immediate use. 2) Start shooting V2: The new version introduces a “one-click packaging” function to enable a complete AI workflow for broadcast media. 3) Meitu Design Office V3: Launched features such as batch AI product maps, 3D product videos, batch templates, and team collaboration to help e-commerce achieve an efficient design workflow; it is expected to launch an AI support program for small and micro e-commerce in June '24 to provide users with free trial accounts and product usage guidance around cities where e-commerce is concentrated. 4) Zhanku Design Service: Achieve efficient designers' matching, demand communication, order placement and after-sales, and help professional designers to monetize with Zhanku Design Service. 5) QIMI: Launched a new AI production and delivery platform for game advertising to enable AI inspiration banks and AI ad production and delivery to reduce game advertising production and delivery costs. 6) MOKI: Based on the self-developed video model 2.0, MOKI, which focuses on AI short film creation, was launched. Through functions covering AI scripting, character design, mirror image conversion, video live video, smart editing, and AI soundtrack, it covers the entire process of early setting, mid-term content generation, and post-production of short film production. The product is expected to be released on July 31.
Investment advice: Domestic AIGC native applications are still in their infancy. Meitu has a basic market for lifestyle products, and productivity scene products can also seize a certain market share. Considering the increase in R&D expenses in '24, we slightly lowered our 24-year adjusted net profit forecast to RMB 550 million (-7% compared to the previous forecast), maintained the 25-26 adjusted net profit forecast of $80/980 million, and maintained the target price of HK$4.42, maintaining the “buy” rating.
Risk warning: the company's AIGC progress falls short of expectations, industry competition intensifies, subscriber growth falls short of expectations, new business risks