Meitu, the Hong Kong-listed tech company, has reported a remarkable surge in profits for the year 2023, tripling its net profit to an estimated range of US$46.36 million to US$51.98 million. This substantial increase, exceeding 200% compared to the 2022 net profit is attributed to the success of its new generative AI-based image and productivity tools.

The tools, namely “Action” for narrated videos and “X-Design” for creating graphics for product and service posters, have outperformed expectations in terms of user growth and subscription conversion. Meitu’s ability to monetize generative AI tools stands in contrast to challenges faced by major tech companies like Microsoft, Google, and Advanced Micro Devices, which have struggled to turn a profit from their own AI initiatives.

This success has also translated into global expansion for Meitu, with products now available in 195 countries and regions. The company experienced rapid growth in subscribers outside mainland China, marking a significant milestone in its international presence.

Founded in 2008 in Xiamen, Meitu initially gained success with a selfie app for touch-ups. However, the company faced setbacks with unsuccessful ventures in the smartphone market and social media, as well as significant investments in cryptocurrencies. Despite warnings to investors in July 2022 about potential losses due to cryptocurrency market volatility, Meitu’s recent focus on generative AI has boosted investor confidence, leading to a more than 7% jump in shares upon announcing the 2023 profit estimates.

While Meitu’s shares experienced an 11% pullback recently, shareholders remain up 68% over the last three years. The quarterly performance saw a 27% drop in share price, causing concerns among investors. Despite these short-term fluctuations, Meitu’s long-term returns have been significant, outperforming the market by 67% over three years.

Meitu’s CEO, Wu Xinhong, emphasized the company’s commitment to understanding AI technology, including employee training programs. The total shareholder return (TSR) for Meitu shareholders over the past year stands at 41%, including dividends, indicating a positive trajectory for the business. As investors navigate the recent pullback, there is a call to examine whether the fundamentals align with the share price and to consider Meitu’s future outlook beyond historical profits.

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