Jefferies: MEITU's 2025 Adjusted Profit Forecast Midpoint Aligns with Expectations; Maintains Buy Rating

Market Performance: The HSI rose by 1.8% to close at 27,027, with significant gains in the HSCEI and HSTECH, while total market turnover reached $255.142 billion.

Insurance Sector Gains: Chinese insurers, particularly CHINA LIFE and PING AN, saw substantial increases of 4% and 4.9%, respectively, following PING AN's stake increase in CHINA LIFE.

Financial Stocks Rise: Major financial institutions like HSBC and HKEX experienced gains between 2.6% and 3.4%, contributing to a positive trend in the financial sector.

Tech and AI Stocks Surge: Tech stocks rebounded, with TENCENT and BIDU-SW rising over 2%, while AI-related stocks like KNOWLEDGE ATLAS soared by 36.2%, reflecting strong investor interest.

Financial Forecast: MEITU projects a 60-66% year-over-year growth in non-IFRS adjusted profit for 2025, aligning with market consensus according to Jefferies' report.

Revenue Growth Drivers: The anticipated growth is attributed to increased revenue from core products like photo and video services, driven by a rise in global paying users and stronger overseas user growth compared to the Chinese market.

Stock Rating and Target: BofAS has rated MEITU's stock as a Buy, setting a target price of HKD12.5, citing the company's potential in AI productivity tools.

Market Activity: The stock has seen significant short selling activity, with a ratio of 26.483% and a total short selling amount of $69.84 million.

Transformation of MEITU: Generative AI has evolved MEITU from a beautification tool into a comprehensive AI photo and video generation and editing application, broadening its market reach to enterprises in e-commerce and advertising.

Growth Projections: Goldman Sachs anticipates that this transformation will enhance MEITU's monthly active users, payment ratio, and average revenue per user (ARPU), leading to a positive outlook for the company.

Company Performance: MEITU (01357.HK) is projected to achieve a 60-66% growth in its 2025 non-GAAP adjusted net profit, reaching RMB938-973 million, according to BofA Securities.

Market Expectations: The median growth estimate of 63% to RMB955 million slightly surpasses market expectations and BofA's forecast by 1%, driven by increased product revenue and operational leverage.

Analyst Rating: BofA Securities maintains a Buy rating for MEITU, setting a target price of HKD11.3.

Short Selling Data: The short selling amount for MEITU stands at $96.99 million, with a ratio of 23.414%.

Stock Performance: Meitu's stock opened up 5.77% and peaked at HKD6.64 before closing at HKD6.48, reflecting a 3.85% increase with significant trading volume.

Profit Forecast: The company announced an expected adjusted net profit growth of 60-66% year-over-year based on non-IFRS measures.

Market Reaction to AI Threat: The software industry faced pressure from AI models by Alphabet and Anthropic, leading to declines in US software stocks and a drop in the Hong Kong bourse, with the HSI down 0.4% in the morning session.

Significant Stock Declines: Major tech companies like Tencent, Bilibili, and Meitu experienced substantial losses, with short selling ratios indicating increased market skepticism.

Broader Tech Sector Impact: Other tech stocks, including Alibaba and JD.com, also saw declines, while semiconductor stocks like SMIC and Hua Hong Semi faced significant drops, reflecting a broader downturn in the tech sector.

Resource Stocks Performance: Gold and silver prices rebounded, and oil stocks gained due to rising refined oil prices in mainland China and geopolitical events, with companies like Sinopec and PetroChina seeing modest increases.