CICC has issued a research report maintaining an Outperform Industry rating for Kuaishou-W (01024), with a target price of HK$72.8, implying a potential upside of 37%. The stock currently trades at 12 times and 10 times its estimated 2026 and 2027 non-IFRS price-to-earnings ratios, respectively. The target price is based on 16 times and 14 times the corresponding non-IFRS P/E ratios.

In the fourth quarter of 2025, the company reported a 12% year-on-year increase in revenue to RMB 39.6 billion. Non-IFRS net profit reached RMB 5.46 billion. E-commerce gross merchandise value grew 13% year-on-year to RMB 521.8 billion, aligning with the institution's and market expectations.

Key observations from CICC are as follows:

Advertising and e-commerce businesses demonstrated steady growth in the fourth quarter, supported by efficiency gains driven by AI technology. Advertising revenue rose 14.5% year-on-year to RMB 23.6 billion, with a slight acceleration compared to the third quarter's 14.0% growth. This performance was attributed to robust demand from advertisers in external sectors such as content consumption, local services, and AI applications, as well as increased penetration of internal promotion products and automated advertising solutions, which have reached nearly 80% among non-e-commerce advertisers.

In e-commerce, GMV increased by 13% year-on-year during the quarter. The proportion of GMV from general product listings remained stable sequentially, while the growth rate of GMV from short video-based e-commerce continued to outpace the overall platform.

The company is deepening its AI strategy. Its AI product, Kling, is targeting a doubling of revenue in 2026, with its large-scale models enhancing operational efficiency. Kling's commercialization has accelerated significantly, generating revenue of RMB 340 million in the fourth quarter and achieving a monthly revenue exceeding $20 million in December 2025, representing an annualized run rate of $240 million. Management expressed confidence in achieving over 100% revenue growth for Kling in 2026. On the product side, the release of models such as O1, 2.6, and the 3.0 series over the past two quarters has reinforced Kuaishou's leadership in AI-powered video generation globally.

AI continues to strengthen core operations: in advertising, the end-to-end generative recommendation model OneRec and intelligent bidding technology contributed approximately 5% to domestic ad revenue growth, with AIGC-powered ad creatives accounting for RMB 4 billion in spending. In e-commerce, the generative search architecture OneSearch increased search-based orders by nearly 3% in the mall scenario, while OneRec technology expanded from general listings to live streaming and short video contexts, boosting overall GMV.

The company plans to increase investment in AI computing infrastructure, with capital expenditure for 2026 projected at RMB 26 billion, up by approximately RMB 11 billion year-on-year. It is also advancing the construction of new computing centers, building on its self-built data center in Ulanqab, Inner Mongolia, to support long-term AI development.

Kuaishou has enhanced shareholder returns, announcing its first-ever annual dividend payout of approximately HK$3 billion, following a special dividend of HK$2 billion distributed in August 2025. Total shareholder return for the year reached 3.5%, based on the closing price as of March 25, 2026, including cumulative dividends of HK$5 billion for 2025 and share repurchases totaling about HK$3.12 billion.

Risks include intensified industry competition, slower commercialization, user attrition, delays in AI development, and regulatory uncertainties.