Zheshang Securities has issued a research report maintaining a "Buy" rating on MEITU (01357). The firm forecasts the company's revenue for 2025-2027 to be RMB 4.185 billion, RMB 5.281 billion, and RMB 6.493 billion, respectively, with net profit attributable to shareholders projected at RMB 964 million, RMB 1.334 billion, and RMB 1.661 billion for the same periods. Using a relative valuation approach, and applying a discount to account for valuation differences across markets compared to peers, Zheshang Securities assigns MEITU a 40x P/E ratio for 2026. This implies a target market capitalization of HKD 53.4 billion and a target price of HKD 11.6. Based on the closing price on February 24, 2026, the current price corresponds to a 2026 P/E of 17x.

The core viewpoints of Zheshang Securities are as follows: While market expectations suggest AI Agents are reshaping work models and workflows, there is divergence regarding whether AI technology will replace traditional software tools, raising concerns about MEITU's long-term competitive advantages and sustainable earnings growth. MEITU's products are positioned as creative platforms rather than simple procedural software, making the company a beneficiary of AI technology. Its long-term moat lies in its accumulated expertise in beauty retouching aesthetics, a large and stable user base which serves as a traffic gateway, and unique workflow paradigms that foster user stickiness. These barriers are expected to propel MEITU as an innovator in the AI-powered beauty and photo editing sector, accelerating the penetration of paid subscriptions and expansion into new markets, thereby driving sustained performance growth.

**Growth Driver 1: Increase in Paying Users** Considering that the number of paying users equals Monthly Active Users multiplied by the paid subscription penetration rate, the growth in MEITU's paying user base primarily stems from overseas market expansion, which boosts MAU. Enhanced user experience powered by AI technology, coupled with higher willingness to pay among B2B productivity tool users, contributes to an overall increase in paid subscription penetration. Tracking recent performance, according to the company's latest 2025 earnings preview, MEITU's global paid subscription user count grew rapidly, with the growth rate from international markets outpacing that of the mainland China market, validating the effectiveness of its global strategy.

**Growth Driver 2: Increase in ARPPU** ARPPU measures the Average Revenue Per Paying User. Given that total revenue equals the number of paying users multiplied by ARPPU, an increase in ARPPU is expected to further boost the company's revenue. MEITU's ARPPU has maintained an upward trend since 2021, and Zheshang Securities anticipates continued steady improvement, primarily due to higher subscription prices for overseas users and the greater payment capability and willingness of B2B users.

**Risk Factors** Potential risks include AI disruption, slower-than-expected expansion in overseas or B2B operations, and intensifying market competition.