Hong Kong Stock Exchange Announcement: Acquisition of all shares of Zcool.com to enhance MiracleVision's competitive advantage in visual modeling.

[Headline News Nuggets]

MEITU (01357): YoY High Growth in Performance, AIGC Accelerates Increase in Paying Rate

Zhitong App reports that MEITU (01357) announced that on February 2, 2024, its subsidiary, Meitu Investment Ltd, plans to acquire all the issued shares of Zcool Network at a total price of approximately USD 39.6405 million. In 2023, the company expects to achieve an adjusted net profit of approximately RMB 330-370 million, a YoY growth of approximately 200%-230%.

Commentary: Zcool has 17 million professional users and a large number of B-side customers. Similar to Visual China, the acquisition will bring significant synergies to MEITU's image and design product business, especially in building the Miracle Vision visual model ecosystem and moat. Although the company's substantial increase in net profit is partly due to the rise in the value of virtual currencies, its fundamentals are relatively strong. The growth of its core business is driven by AI subscription rates, and the company's AI products have also exceeded expectations. The company's core product, MEITU Xiuxiu App, keeps up with the current aesthetic trends through frequent iterations. From 2022 to 2023, it closely follows the AIGC trend and launches AI functions such as "AI Painting" and "AI Design". AIGC is driving the acceleration of user paying rate increase, and the global strategy is continuously advancing: 1) The company has independently developed the Miracle Vision visual model, which has been iterated to version 4.0; 2) The company continues to systematically integrate AIGC functions into core image, video, and design processes. AIGC products and functions are expected to enhance user experience and accelerate subscription rate increase. In terms of overseas markets, the company's products have covered approximately 195 countries and regions worldwide, driving the increase in overseas product revenue. The company's product, MEITU Design Studio, is aimed at productivity scenarios and has achieved: 1) Integration of AI commercial photography functions to facilitate user operations and improve workflow efficiency from product photography to online listing; 2) Access to the Taobao service market; 3) Price increase for company product members, which will drive ARPPU increase, to be implemented in January 2024. The company is gradually expanding into the productivity side and is expected to tap into the growth curve and open up market space in the productivity side. The company's AI portrait generation effect has reached the top level in China, and the AIGC strategy is expected to unlock the B-side payment space.

[Key Announcement Nuggets]

Kangzhe Pharmaceutical (00867): Obtains Exclusive License Rights for First-Line Phosphate-Lowering Drug Viforay®, Innovative Drug to Drive Rapid Performance Growth

Zhitong App reports that Kangzhe Pharmaceutical (00867) announced that on February 2, 2024, the group, through its wholly-owned subsidiary, signed a replacement agreement with Vifor Fresenius Medical Care Renal Pharma Ltd. (VFMCRP) and Veyong Investment (Hong Kong) Co., Ltd. (Veyong Investment) for the chewable tablet Viforay® (Viforay®) containing sucroferric oxyhydroxide. Commentary: Vifor Pharma® is currently the first and only iron-based, non-calcium phosphate binder approved for listing in China, maintaining a leading position in the global phosphate binder market. It fills the gap in the treatment of phosphorus reduction for CKD stage 4-5 children aged 12 to 18 or undergoing dialysis in China. The company collaborates with global innovative forces and has a rich pipeline of innovative drugs. Innovative drugs such as Veltassa, Ferinject, and others have been newly included or continue to be included in the national medical insurance catalog. The company's three innovative drugs, Dexmedetomidine nasal spray, Tislelizumab injection, and Methotrexate injection, for psoriasis have all been included in the national medical insurance catalog. Orphan drug Dantrolene sodium tablets and Xinhuosu have successfully renewed their contracts. This inclusion of 5 new/continuing products in the national medical insurance catalog is expected to drive rapid growth in performance. The company's multiple innovative products have obtained rights in the Southeast Asian market. At the same time, the company strategically cooperates with biotech companies or pharmaceutical enterprises in Europe, America, Japan, and China to accelerate the commercialization process of products and explore a new second growth curve for the company. With the core products Veltassa and Ferinject entering the eighth batch of national procurement, and the main products being fully procured, the impact of centralized procurement on the company will gradually diminish, and the company's future performance is expected to stabilize at a high level.

[Important Hong Kong Stock Exchange Announcements]

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