Maintain Buy rating on Meitu 1357.HK; AI productivity tools and overseas markets are the key growth drivers

Overview

This report is Goldman Sachs' earnings review of Meitu 1357.HK. It notes that 2025 net profit fell 13% YoY due to a high base from one-off gains in the prior year, but adjusted net profit grew 65% YoY and overall was broadly in line with management guidance. The core investment case centers on AI features driving paid conversion, productivity tools lifting ARPU, and overseas expansion bringing new users and higher monetization potential.

Core views

Goldman Sachs maintains its Buy rating on Meitu. Positive factors include: after AI features launched, paid subscription users grew 34% YoY and the subscription rate rose to 6.1%; the productivity tools subscription rate reached 9% and is expected to become a more important revenue source; overseas MAU reached 101m and kept growing quickly, with Vmake's US ARR at about US$3m. Cautious factors include: lower revenue expectations for leisure tools in China and a higher expense ratio due to increased AI feature R&D spending.

Analysis framework

报告结合2025年业绩、用户指标、订阅率、ARPU、地区增长和产品管线，对2025-2028E收入、费用、净利润和EPS进行预测修正，并使用两阶段DCF方法计算12个月目标价。报告还参考12个月远期P/S走势作为估值背景。

Methodology notes

• Valuation methods两阶段DCF

  现金流折现估值

  Goldman Sachs uses a two-stage DCF valuation, assuming a WACC of 11.5%, second-stage free cash flow growth of 12% YoY for 2032E-2036E, and a terminal growth rate of 2%, resulting in a target price of HK$14.30.

• 风险收益评估12个月目标价框架

  目标价与当前价的总回报潜力

  The report measures implied upside using the 12-month target price of HK$14.30 and the current price of HK$4.32, and maintains a Buy rating on that basis.

• 因子框架GS Factor Profile

  成长、财务回报、估值倍数和综合因子比较

  Goldman Sachs' factor profile compares the company with covered stocks and industry peers across growth, financial return, valuation multiples, and composite metrics.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Meitu 1357.HK

  Covered company and core investment target

  Strengths

  AI features are driving paid subscription growth, the productivity tools subscription rate is higher than that of leisure tools, overseas user growth is faster, and the DCF target price indicates significant upside.

  Weaknesses

  Revenue expectations for leisure tools in China have been lowered, AI R&D spending is pushing up the expense ratio, and 2025 net profit declined YoY due to a high base.

  Comparison

  Compared with the company’s traditional leisure beautification tools, AI productivity tools have a higher subscription rate and greater ARPU expansion potential; overseas market growth is faster than in mainland China.

  Risks

  AI adoption and monetization fall short of expectations, paid rate below expectations, and intensifying competition.

Key data

• 2025年MAU276mUp 4% YoY, below the 280m at the end of 1H25, mainly due to seasonality and the product pipeline.
• 2025年付费订阅率6.1%Above 4.7% in 2024, with AI features driving paid users up 34% YoY.
• 2025年生产力工具订阅率9%Above the 6% subscription rate for leisure tools and a key driver of future revenue contribution.
• 2025年海外MAU101mUp 6.3% YoY; mainland China MAU was 175m.
• Vmake美国ARR约US$3mMainly used for personalized video communication; management said the US market is growing quickly.
• 目标价HK$14.30Previous target price was HK$16.00; this was cut due to lower earnings forecasts.
• 当前价HK$4.32Closing price as of 2026-03-30.
• 隐含上行空间231.0%Based on the HK$14.30 target price and HK$4.32 current price.

Impact & implications

The investment implication of this report is that Meitu faces short-term pressure from slower revenue growth in leisure tools in China and higher AI R&D spending, but its longer-term growth narrative is shifting toward AI productivity tools, Agent solutions, and high-ARPU overseas markets. If the revenue contribution from productivity tools and overseas paid conversion continue to improve, valuation should be supported; if AI monetization slows versus expectations, earnings and the target price may remain under pressure.

Risks

• AI adoption and monetization are slower than expected.
• Paid conversion is lower than expected.
• Competition is more intense than expected.
• Higher AI feature development spending may pressure margins.
• Revenue growth in China’s leisure tools is weaker than expected.

What to watch

• Whether the revenue contribution from productivity tools continues to rise in 2026E.
• The lift to ARPU from E-commerce Agent, Try-on Agent, Poster Agent, and Video Agent in Meitu Designkit.
• Growth in overseas MAU and paid users, especially in Europe, the Americas, and East Asia.
• Whether Vmake's US ARR can continue expanding from about US$3m.
• Changes in AI R&D spending and the expense ratio, and their impact on net margin.