A research report maintains the Non-IFRS net profit forecast for KUAISHOU-W (01024) for 2026 and 2027. The current share price corresponds to 10 times and 8 times the 2026 and 2027 Non-IFRS P/E ratios, respectively. An Outperform industry rating is upheld. Considering the company's business structural transformation, the valuation methodology has been adjusted from P/E to a SOTP segment valuation. The target price is maintained at 72.8 HKD, representing 16 times and 14 times the 2026 and 2027 Non-IFRS P/E ratios, respectively, implying an upside potential of 61%.
The key points are as follows: First-quarter 2026 revenue of 33.7 billion yuan, a year-on-year increase of 3%, aligned with expectations. Non-IFRS net profit attributable to shareholders of 3.37 billion yuan exceeded expectations, primarily due to higher-than-expected net other income.
AI is deeply empowering advertising and e-commerce, with core commercial growth remaining robust. 1) Online Marketing Services: First-quarter 2026 revenue grew 9% year-on-year, with domestic revenue increasing over 10%. Growth in non-ecommerce marketing service revenue was driven by sectors including content consumption, lifestyle services, and AI applications. Regarding AI penetration, AIGC short video materials accounted for 10% of total platform short video marketing spend. In terms of ad delivery and recommendation, generative recommendation and intelligent bidding models contributed approximately a 3-4% increase in domestic marketing service revenue. 2) E-commerce: Achieved healthy growth in the first quarter of 2026, with quarterly GMV from brand merchants growing over 25% year-on-year. In AI, frameworks like the generative search framework OneSearch V2 drove approximately a 3% increase in GMV from e-commerce search business. Regionally, the overseas segment's operating loss narrowed sequentially to 31 million yuan in the first quarter of 2026, with DAU and usage time in the Brazilian market remaining stable sequentially.
Kling AI commercialization is advancing rapidly, with technology globally leading. Kling's first-quarter 2026 revenue exceeded 650 million yuan, a year-on-year increase of over 300%. As of March 2026, its annualized recurring revenue approached 500 million USD. Regarding models, the launch of the Kling 3.0 series further enhanced professional-grade video creation capabilities. At the application level, Kling is deeply involved in visual effects production for mature commercial film and television works both domestically and internationally. Its penetration rate continues to rise in professional scenarios such as film/TV, advertising, and e-commerce, maintaining its commercialization capability at the forefront of the global video generation sector.
Strong cash flow supports long-term AI deployment. Management indicated during the first-quarter 2026 earnings call that the capital expenditure guidance of 26 billion yuan for this year is maintained, with the majority occurring in the first half, which will help control computing power costs effectively. The company also aims to maintain positive group cash flow for the full year. As of the end of the first quarter of 2026, total available funds reached 117.7 billion yuan, providing a solid financial foundation to support long-term development in the AI era and shareholder returns.
Risks include: slower-than-expected development of AI technology; intensifying industry competition; high computing power costs; potential delays in business separation plans; deceleration in core business operations; and changes in industry regulations.