China Merchants Securities issued a research report maintaining an "Overweight" rating on KUAISHOU-W (01024) with a target price of 64 HKD.

This target corresponds to adjusted price-to-earnings ratios of 15x and 13x for the 2026 and 2027 fiscal years, respectively.

The report posits that Kuaishou is at a pivotal inflection point where AI is reshaping its content ecosystem and unlocking commercial value.

The Kling AI model has validated the certainty of a second growth curve through a commercialization pace that exceeded expectations and its leading market position.

Furthermore, the pervasive integration of AI across areas like AI short dramas, AI marketing agents, and AI e-commerce search is consistently injecting incremental value into traditional business lines.

The company maintains ample cash reserves, with an annual shareholder return rate of approximately 4%, demonstrating disciplined financial management alongside its firm commitment to AI investment.

Kuaishou's first-quarter 2026 results surpassed expectations, with total revenue reaching 33.7 billion yuan, a year-on-year increase of 3.4%, slightly exceeding market forecasts by 1%.

Online marketing services revenue was 19.6 billion yuan, up 9.3% year-on-year and 1% above expectations, primarily driven by explosive growth in AI short dramas and robust advertising demand for AI applications.

Domestic online marketing revenue growth for the quarter exceeded 10%, with the large AI model contributing a 3-4% incremental gain to domestic marketing income.

The report notes that other service revenue for the first quarter was 5.6 billion yuan, a 15.9% year-on-year increase, surpassing expectations by 2%.

This was mainly due to Kling AI generating over 650 million yuan in revenue for the single quarter, significantly exceeding expectations by 29%.

Live streaming revenue was 8.5 billion yuan, declining 13.5% year-on-year, which aligned with expectations and reflects the ongoing governance of the entertainment live streaming ecosystem.