Citi has published a research report initiating coverage on MEITU (01357) with a "Buy/High Risk" rating and a target price of HK$7. The firm believes the market is underestimating the company's AI-driven upside potential as an early mover in product and monetization model transformation.

Citi also notes that MEITU's commitment to enhancing shareholder returns and the chairman's continuous share purchases should provide support for the stock price. The bank points out that MEITU is leveraging AI to penetrate visual workflows, evolving from a subscription model to an AI-based consumption monetization model to boost per-user value and ARPU.

MEITU also benefits from a user base with high spending power, particularly in the beauty sector, which supports profitability. Meanwhile, large language models (LLMs) still face challenges in achieving the controllability and consistency required for high-quality facial editing. Additionally, the company's strong and sustained growth in overseas operations is expected to drive higher ARPU.