Incident: In '23, the company achieved revenue of 2,696 billion yuan, an increase of 29.3% over the previous year; adjusted net profit to mother was 368 million yuan, an increase of 233.2% over the previous year, falling to the upper limit of the previous performance forecast.
Revenue from imaging products is the main driving force, and AI accelerates payment rates and continuously verifies logic. In 2023, the company's imaging and design product business maintained rapid growth, achieving revenue of 1.33 billion yuan, a year-on-year increase of 52.8%, mainly driven by increased payment rates. In 2023, the company's MAU was about 250 million, of which 9.11 million were paid subscription members, up 62.3% year on year, and subscription penetration rate was 3.7%, up 1.4 pct year on year. The company continues to iterate AIGC capabilities, and the self-developed model Miracle Vision has launched Wensheng's video function; AI enhances product experience and functionality, and accelerates the increase in payment rates. We believe that as the company continues to advance its generative AI capabilities and iterative product upgrades, the subscription penetration rate is expected to increase further.
The ecological layout of productivity has been gradually improved, and localization strategies have accelerated overseas expansion. For 23 years, the company actively promoted the core imaging strategy of productivity and globalization. 1) In terms of productivity strategy, in 2023, the MAU of the company's productivity products reached 17.66 million, an increase of 74.3% over the previous year. Take Meitu Design Office as an example. In '23, its revenue exceeded 100 million, an increase of 230% over the previous year. The company will continue to enhance Meitu Design's capabilities in video content in '24. In February '24, the company announced the acquisition of the designer platform Zankool, which has more than 17 million registered users, which is expected to create a productivity ecosystem and bring synergy effects. 2) In terms of the global strategy, the company's products currently cover 195 countries and regions, and 34% of overseas subscribers contribute 51% of video revenue; the company is actively building more lightweight overseas products and using localized marketing methods to expand its market share, and overseas revenue is expected to grow in 24 years.
Increase investment in AI research and development, and operating leverage brought about by revenue growth will increase profit margins. In '23, the company's gross margin reached 61.4%, up 4.5 pct year on year, mainly due to the increase in the share of high-margin imaging and design product business; in '23, sales/management/R&D expenses reached 15.9%/11.2%/23.6%, respectively, a year-on-year decrease of 3.5/1.9/4.5 pct; excluding the influence of street network factors, R&D expenses increased by about 15% year on year. The company will continue to invest in research and development related to generative AI and increase the global promotion of products. It is expected that R&D and sales expenses will increase to a certain extent in 24 years.
Profit forecast and investment rating: The company focuses on the video circuit. We are optimistic about the company's competitive advantage and AI empowerment in this field. As the company will continue to invest in AI, we will adjust the adjusted net profit for 2024-2025 from 58/ 980 million yuan to 59/93 million yuan, which is expected to be 1.21 billion yuan in 2026, corresponding to the 2024-2026 PE of 22/14/11x, maintaining a “buy” rating.
Risk warning: The increase in payment rates falls short of expectations, AIGC technology and applications fall short of expectations, and the expansion of productivity scenarios falls short of expectations