Meitu de­but less than flashy

China Daily (Hong Kong) - - BUSINESS - By FAN FEIFEI fan­feifei@chi­nadaily.com.cn

The main­land’s selfie app de­vel­oper Meitu Inc made its de­but on the Hong Kong Stock Ex­change on Thursday, mark­ing the big­gest tech­nol­ogy ini­tial pub­lic of­fer­ing in HK in nearly a decade.

Its open­ing price was HK$8.78 ($1.13), higher than the HK$8.50 ini­tial of­fer­ing price. It closed flat, at HK$8.5, with the in­tra­day trad­ing low at HK$8.33.

The list­ing raised $629 mil­lion, and Meitu now has a val­u­a­tion of $4.6 bil­lion.

Meitu’s apps have gath­ered 456 mil­lion monthly ac­tive users by en­abling them to slim faces, change the color of com­plex­ions and widen eyes via its photo and selfie edit­ing tools.

Wu Xin­hong, founder and CEO of Meitu, said: “Meitu is step­ping for­ward to build up its so­cial me­dia plat­form to cap­ture a large num­ber of users and also has a plan in ar­ti­fi­cial in­tel­li­gence and aug­mented re­al­ity.”

Meitu’s busi­ness model is to fo­cus on at­tract­ing a large user base with in­no­va­tive prod­ucts and ser­vices free of charge ini­tially, fol­lowed by the im­ple­men­ta­tion of var­i­ous mon­e­ti­za­tion strate­gies when reach­ing a sig­nif­i­cant scale, said the com­pany.

Statis­tics showed although its rev­enue has in­creased from 86 mil­lion yuan ($12.40 mil­lion) to 750 mil­lion yuan from 2013 to 2015, its net loss was 2.2 bil­lion yuan in the six months ended June 30, up 69.2 per­cent com­pared with 1.3 bil­lion yuan in the same pe­riod last year.

Its long-term prof­itabil­ity has come un­der doubt. The com­pany has about 97 per­cent of its rev­enue com­ing from smart hard­ware.

The Xi­a­men-based com­pany aims to gen­er­ate more money from on­line ad­ver­tis­ing, e-com­merce and games in the fu­ture, said Cai Wen­sheng, founder and pres­i­dent of Meitu.

Ex­perts said Meitu is still strug­gling to find a prof­itable busi­ness model.

Shen Meng, di­rec­tor of Chan­son & Co, a bou­tique in­vest­ment bank in China, said: “The cur­rent busi­ness model doesn’t al­low Meitu to get rid of its deficit dilemma. The tech­no­log­i­cal thresh­old of Meitu’s selfie app and hard­ware prod­ucts such as smart­phones is low, and the com­pe­ti­tion is very fierce.”

Lu Zhen­wang, an in­ter­net an­a­lyst in Shang­hai, said new fields such as e-com­merce and games have no di­rect re­la­tion­ship with Meitu’s cur­rent busi­ness, adding that the com­pany faces enor­mous chal­lenges ahead.

The tech­no­log­i­cal thresh­old for Meitu’s selfie app ... is low, and the com­pe­ti­tion is very fierce.” Shen Meng, a di­rec­tor of Chan­son & Co

DORIS CHAN / FOR CHINA DAILY

Cai Wen­sheng (left), founder and pres­i­dent of Meitu Inc, and ac­tress An­ge­lababy (cen­ter) cel­e­brate with com­pany top ex­ec­u­tives at the IPO de­but on the Hong Kong Stock Ex­change on Thursday.

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