1、ab9 July 2025Global ResearchPowered byUBS Evidence LabYESInitiation of CoverageMeituVisible AI monetizationUnlocking TAM by 10 x,initiate at Buy and sector top pickWe assume coverage on China Software Sector and initiate Meitu at Buy and sector top pick.We believe Meitu is well positioned to expand

2、into global creative software market(productivity business),unlocking a TAM 10 x that of casual image editing market(life business).Leveraging deep industry insights,Meitu should be able to drive monetization via its proprietary GenAI capability and globalization.A more disciplined strategic focus o

3、n large consumers and small enterprises driving potentially faster profit growth than peers does not appear to be in the price.We estimate Meitus revenue/adjusted net profit to grow at 27%/42%2024-27E CAGR.Our PT is HK$13.60,based on 1.3x PEG.Life business-established subscription growth amplified b

4、y AISubscription revenue represented 62%of total revenue in 2024 with the majority came from life products,such as Meitu and BeautyCam.Meitu has pivoted from a hardware-sales or ad-driven to a subscription-focused model since 2018-19,focusing on enhancing product quality and user experience to drive

5、 paying ratio,evidenced by sustained R&D but declining S&M intensity.With consumers improving willingness to pay for digital services in China and faster penetration of oversea markets,leveraging GenAI features which are behind paywall,we estimate life revenue to grow at 27%2024-27E CAGR,driven by p

6、aying ratio reaching 7.5%by 2027E,from 4.6%in 2024.Productivity business-visible path of AI monetizationWe estimate global creative software market size at US$15-20bn in 2024,10 x casual image editing market size at US$1-2bn.Although Adobe dominates the market,players that focus on specific use case