24H1 performance

1) Overall performance: 24H1 Meitu recorded revenue of 1.62 billion yuan, yoy +28.6%; GAAP net profit of 0.3 billion yuan, yoy +45.0%; non-GAAP net profit of 0.27 billion yuan, yoy +80.3%; gross margin of 64.9%, +5.1 pct year on year.

2) By business: Video and design product revenue recorded 0.93 billion yuan, yoy +54.5%; beauty solutions 0.27 billion yuan, yoy -5.5%; advertising revenue 0.41 billion yuan, yoy +18.3%; other businesses 7.1 million yuan, yoy -69.3%.

Product marketing is progressing brilliantly. Overseas users are driving monthly active growth, AI drives the payment conversion rate to continue to increase, and the payment penetration rate reached 4.2% at the end of the second quarter

Overall user size: As of the first half of the year, the total number of monthly active users of the company's products was about 0.258 billion, up 4.3% year on year. The growth rate increased compared to the 2.6% year-on-year growth rate at the end of last year, mainly due to the increase in monthly active users from countries and regions other than mainland China (15% year-on-year increase). Currently, the number of overseas monthly active users accounts for 32.9% of the total number of monthly active users, an increase of 3.1 pct year on year. Wink's monthly active users topped the iOS App Store lists in Thailand and Indonesia. The growth rate of Wink's monthly active users in overseas regions far exceeds the growth rate of monthly active users in mainland China.

As of the first half of the year, the number of monthly active users of Wink has increased by about 99% year over year, and is now the third-largest app in Meitu's product matrix after Meitu Xiuxiu and Beauty Camera. Among productivity tools, Meitu has also successively launched X-Design (Meitu Design Office) in the US, Canada, Australia, and the United Kingdom.

Paying user side: As of 1H24. The company's paid subscribers reached 10.81 million, and the subscription penetration rate reached 4.2%, an increase of 0.5 pct over the end of '23. According to the company's performance report, the AI function penetration rate of Meitu's products is currently close to 87%. Under AI, products continue to innovate to meet user needs, and the penetration rate of subsequent subscriptions is expected to continue to increase.

In June of this year, the Meitu Video Festival launched a variety of new products, which are expected to contribute to the increase on the revenue side. On June 12, Meitu held the 3rd Meitu Video Festival and released 6 products on site:

Professional AI batch retouching software Meitu Yunxiu V2; AI broadcast video tool launched V2; AI design tool Meitu Design Studio V3; design service platform website cool design service; game advertising AI production and delivery platform Kiwi; AI short film creation tool MOKI. It covers the fields of commercial photography, broadcast video, e-commerce design, design services, game marketing, and video generation. Currently, the new product has not entered the full promotion stage. It is expected that after further iterative upgrades, it will be promoted globally, which is expected to contribute to revenue growth.

Investment advice

With the support of AI, we are optimistic that the company's payment rate conversion will further increase. We expect the company's 2024-2026 revenue to be 3.535/4.577/5.624 billion yuan (previous value: 3.735/4.663/5.595 billion yuan), up 31.1%, 29.5%, 22.9% year on year, and non-IFRS net profit of 0.604/0.828/1.074 billion yuan (previous value 0.565/0.739/0.928 billion yuan), up 64.1% /37.0 billion yuan year on year %/ 29.6%, maintaining a “buy” rating.

Risk warning

The risk that the competitive environment will deteriorate; the risk that the product launch will not develop as well as expected.