Dongfang Securities has issued a research report forecasting KUAISHOU-W's (01024) adjusted net profit attributable to shareholders for 2026-2028 to be 17.0/18.5/20.4 billion yuan. Based on comparable company analysis, a 17x P/E valuation for 2026 is applied, resulting in a reasonable value estimate of 281.6 billion CNY, equivalent to 322.0 billion HKD (using an HKD/CNY exchange rate of 0.875). This implies a target price of HKD 74.06 per share, leading to the maintenance of a "Buy" rating. Dongfang Securities' key viewpoints are as follows:
The Kling model demonstrates both leading capabilities and cost-effectiveness. Its 4K direct output feature creates differentiation by focusing on film and television applications. In terms of model capability, according to the Artificial Analysis text-to-video ranking, domestic models Alibaba's Happyhorse-1.0, ByteDance's Seedance2.0, and Kuaishou's Kling 3.0 occupy the top three positions. Since the release of Kling 1.0 in June 2024, despite changes in the competitive landscape from new model releases, the Kling series has consistently remained in the top tier, showcasing leading technological prowess. Regarding pricing, the API cost to generate a one-minute video is $14.4 for Happyhorse-1.0, $22.4 for ByteDance's Seedance2.0, and $13.4 for Kuaishou's Kling 3.0, indicating Kling offers more outstanding overall value. In functional iteration, the recent launch of the 4K direct output feature for Kling reportedly provides stronger deliverability, particularly for demanding fields like advertising and film/TV production, based on creator feedback.
Strong downstream demand, such as for AI-generated series, is expected to drive high growth in Kling's Annual Recurring Revenue (ARR). Sensor Tower data shows Kling's mobile revenue grew 24% and 10% month-over-month in March and April 2026, respectively, with MAU data remaining at a relatively high level above 7 million. The bank attributes this growth primarily to increased usage penetration. From the downstream content scenario perspective, the number of AI-generated series being broadcast increased by 138% in March compared to January. The bank believes technology providers stand to benefit significantly from the high growth in downstream vertical AI content. As a model choice with leading capabilities and cost-effectiveness, Kling's scenario expansion is expected to drive sustained high growth in its commercial performance.
Increased capital expenditure (CapEx) investments are noted. Considering depreciation add-backs, core main business profit shows steady growth. CapEx investment for 2026 is projected to increase by 11.0 billion yuan compared to 2025, reaching 26.0 billion yuan. Assuming a straight-line depreciation method over 4-5 years, the negative impact on 2026 profit increment is estimated at 2.2 to 2.75 billion yuan. However, when depreciation is added back, the core main business profit is expected to maintain steady growth.
Risk factors include a slower-than-expected recovery in macro consumption, lower-than-expected domestic commercialization efficiency, increased losses in overseas business, and slower-than-expected iteration of Kling technology.