Chinese selfie app firm Meitu reduces loss, aims for expansion abroad

Sijia Jiang

* Net loss narrows to 540.5 mln yuan

* Revenue rises to 1.58 bln yuan

* Stock gained around 80 pct since December IPO with

volatile trading in March

(Adds interview with management, updates analyst comment)

HONG KONG, March 24 (Reuters) - Chinese photo app owner and

mobile phone maker Meitu Inc's net loss last year

was down by 24 percent, the company reported on Friday, in its

first results since its shares made their market debut in Hong

Kong in December.

The company, which is known for the eponymous app's selfie

image-enhancing powers and aims to reach breakeven point some

time this year, will now be stepping up efforts to gain more

overseas users, Chairman Cai Wensheng told Reuters.

The expansion abroad will entail opening up new offices,

possibly in Europe, and offering localised versions of its

products.

"I think in two years we should be on par with Facebook and

Google in user numbers," Cai said.

Co-founder and Chief Executive Wu Xinhong told Reuters the

firm was also preparing to commercialise the facial recognition

technology used in its image enhancing software.

"We do not rule out collaboration with smartphone giants by

exporting our software technology," Wu said.

He added that the firm plans to set up an artificial

intelligence laboratory with leading universities this year and

is also on track to launch Pushion, its fashion-focused social

e-commerce platform in the first half of 2017.

Last year the company incurred a net loss of 540.5 million

yuan ($78.5 million), down from 710 million in 2015, while

revenue rose to 1.58 billion yuan from 742 million yuan.

Monthly active user numbers rose 32 percent to 520 million

in January, including a 79 percent rise in overseas numbers.

Meitu's share price has gained around 80 percent since last

year's listing, closing at HK$15.50 on Friday after volatile

trading so far this month.

Cai said he did not think the company was being overvalued,

comparing it with newly listed U.S. social media company Snap

Inc, which has a market value of $27.5 billion.

Xiamen-based Meitu floated in December with a $630 million

valuation, making it Hong Kong's largest technology listing in a

decade.

Meitu was among the top traded stocks after it was this

month included among a list of stocks in a new trading link

between Hong Kong and mainland China, sparking concerns of

cross-border speculation.

"The current valuation of the stock strikes us as extremely

generous, and seems to have factored in significant upside for

which there is little evidence thus far to support such a degree

of optimism,” said Ryan Roberts, an analyst at Hong Kong-based

advisory MCM Partners.

Despite being known as a software company since its

foundation in 2008, smartphone sales accounted for 93 percent of

its revenue in 2016. Cai said the firm recorded a small profit

from the sale of 750,000 phones last year, a volume that he said

would "at least double" this year.

Wu said revenue outside phone sales, grouped as "Internet

and others", grew 40.1 percent last year to 104.7 million yuan,

showing it was on track to make money from its user traffic,

though the segment's gross loss margin was higher at 55.1

percent.

($1 = 6.8860 Chinese yuan renminbi)

(Editing by Randy Fabi, Greg Mahlich)