Core views:
Shooting and beautifying the leader. The user is deeply aware, and MAU is ahead of its peers. According to Questmobile, Meitu Xiuxiu has the highest user activity in the field of photo editing. In April '24, the company's MAU market share reached 54%. The MAU market share has remained above 50% in the past two years, and it has high user stickiness. MAU's second-most prominent figure As of April '24, MAU's market share was around 28.6%. Other competitors, MAU, have a lower share, and there is a big gap with Meitu Xiuxiu.
AI drives the increase in user payment rates and actively promotes products to go overseas. According to the company's financial report, as of '23, the number of monthly active users of the company reached 250 million, an increase of 3% over the previous year. The company introduced AI-related features to increase users' willingness to pay, and the payment rate increased from 0.65% in '20 to 3.7% in '23. The company actively promotes product globalization and launches a number of new functions to acquire users overseas.
We believe that compared to other subscription apps, the company's user payment rate is low. As user subscription data increases and products continue to go overseas, there is plenty of room for C-side subscription revenue to grow.
AI reduces costs and increases efficiency for small and medium-sized manufacturers, and penetration rates are expected to increase at an accelerated pace. The company launched products for business scenarios such as “Meitu Design Studio” and continued to iterate to reduce design costs for small and medium-sized enterprises through AI design services. We believe that small and medium-sized enterprises are cost sensitive, and the results of AI cost reduction and efficiency will accelerate the increase in penetration rate and drive payment growth.
Profit forecasting and investment advice. The company's 24-26 revenue is estimated to be 36.63 billion yuan, 47.07 billion yuan, and 5.646 billion yuan, respectively, and net profit to mother of 5.08, 7.00, and 920 million yuan, respectively. The company's business model shifts to subscriptions, increases profitability, uses PE methods for valuation, and combines PS discussions.
Referring to the comparable company, based on 28X PE, corresponding to 3.9X PS, Meitu estimates that the reasonable valuation of Meitu is RMB 14.219 billion, corresponding to HK$15.585 billion (RMB = 0.91:1), which is a reasonable value of HK$3.44 per share. First coverage, giving a “buy” rating.
Risk warning. Users' willingness to subscribe falls short of expectations, risk of improving AI terminal image editing capabilities, risk of e-commerce platforms participating in design competition, and risk of AI models falling short of expectations.