Meitu's Post-2025 Surge: Sustained Momentum or Overvaluation?

In the dynamic landscape of AI-driven consumer technology, Meitu (HKG:1357) has emerged as a standout performer, posting a 71.3% year-on-year surge in adjusted net profit to RMB 467 million in H1 2025, alongside a 12.3% revenue increase to RMB 1.8 billion, according to its H1 2025 results. This growth, fueled by AI-powered photo, video, and design tools, has propelled the company's market valuation to HKD 37.58 billion, with a trailing P/E ratio of 37.85 and a forward P/E of 33.10, per its valuation metrics. Yet, as investors weigh the sustainability of this momentum, critical questions arise: Is Meitu's valuation anchored in robust fundamentals, or does it reflect speculative optimism about its AI-driven future?

Financial Resilience and AI-Driven Growth

Meitu's core photo, video, and design products segment accounted for 74% of total revenue in H1 2025, surging 45.2% year-on-year to RMB 1.35 billion, as shown in the company's H1 2025 results. This was driven by a 42% increase in paid subscribers to 15.4 million, underscoring the company's ability to monetize its AI tools. The launch of RoboNeo, an AI design agent enabling automated visual content creation, further accelerated adoption, achieving top rankings in international app stores, as noted in a company media release.

Global expansion has also been a key catalyst. Meitu's international monthly active users (MAUs) grew 15.3% year-on-year to 98 million, representing 35% of its total MAU base of 280 million, reported by China Daily. Products like DesignKit (e-commerce design) and Kaipai (AI-assisted video production) saw over 90% MAU growth in non-China markets, reflecting strong demand for productivity tools in emerging economies, according to a growth strategy analysis.

Valuation Realism: Metrics and Risks

While Meitu's financials appear robust-return on equity (ROE) of 19.08% and a low debt-to-equity ratio of 0.05-its valuation metrics raise caution. A trailing P/E of 37.85 and EV/EBITDA of 47.00 suggest investors are paying a premium for future growth, particularly in AI applications. For context, the S&P 500's average P/E ratio hovers around 25, though this varies by sector.

The company's high beta of 1.33 indicates volatility, which could amplify risks if AI adoption slows or competition intensifies. Rivals like Canva and Adobe are also expanding into AI-driven design, potentially fragmenting Meitu's market share. However, Meitu's R&D investment of RMB 450 million in H1 2025-resulting in 463 patents and 317 software copyrights, per its H1 2025 results-positions it to maintain a technological edge.

Long-Term Catalysts: Productivity and Globalization

Meitu's post-2025 strategy hinges on two pillars: productivity tools and globalization. The company is targeting the B-end market with DesignKit and Kaipai, aiming to capture enterprise clients in e-commerce and video production, as outlined in the growth strategy analysis. This shift from consumer to business-focused tools could diversify revenue streams and reduce reliance on cyclical consumer spending.

Geographically, Meitu's localized strategies-such as adapting app features to regional preferences and collaborating with influencers in Spain, Vietnam, and other markets-have driven international MAU growth, as noted in the company media release. With 35% of its user base now outside Mainland China, the company is less exposed to domestic regulatory risks and more insulated from macroeconomic fluctuations in a single market.

The Balancing Act: Momentum vs. Overvaluation

Meitu's valuation appears justified by its execution in AI innovation and global expansion. However, the market's current enthusiasm may not account for potential headwinds. For instance, the AI design agent market is still nascent, and user retention rates for AI tools remain untested over the long term. Additionally, Meitu's EV/FCF ratio of 33.27 suggests investors are betting heavily on future cash flow, which could be volatile if adoption curves flatten.

A critical test will be the company's ability to scale its B-end tools profitably. While DesignKit and Kaipai show promise, transitioning from consumer to enterprise markets requires significant infrastructure and customer support investments. If successful, this could unlock new revenue tiers; if not, growth may plateau.

Conclusion

Meitu's post-2025 surge reflects a compelling blend of AI innovation, global expansion, and financial discipline. While its valuation metrics suggest optimism, the company's focus on productivity tools and international diversification provides a foundation for sustained growth. Investors should monitor key metrics: user retention rates for AI agents, the success of B-end tool monetization, and the pace of international MAU growth. For now, Meitu's valuation appears realistic-if not cautiously optimistic-given its execution track record and strategic clarity.