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3、ecision.Refer to important disclosures on page 30 to 32.Analyst Certification on page 27.Price Objective Basis/Risk on page 27.12874360 Meitu Inc.AI,beauty&productivity;new Buy on high visibility of subscription growth;HK$13.5 PO Initiating Coverage:BUY|PO:13.50 HKD|Price:9.19 HKD Leading beautifica

4、tion and photography enabler;new Buy We initiate coverage of Meitu,a leading photo editing and photography software provider in China,at Buy with a PO of HK$13.5(47%upside potential),based on 45x 12-month forward adjusted P/E,set at 0.5SD above the historical average on the companys stronger profita

5、bility outlook.Our target multiple implies 1.1x PEG,below the average of 1.5x for leading global SaaS companies.We rate Meitu at Buy on(1)rising domestic and overseas paying ratios leveraging the AI flywheel,(2)rapid expansion of productivity tools as a new growth driver,and(3)strong earnings growth

6、 on subscription-fueled operating leverage.Overall,we estimate FY24-27E adjusted net profit CAGR of 42%,with adjusted NPM rising from 17.5%in FY24 to 28.1%in FY27E.Downside risks are(1)slow paying user conversion,(2)competitive pressure,(3)regulatory and geopolitical issues,(4)valuation compression.