GTHT has reiterated its "Overweight" rating on KUAISHOU-W (01024) with a target price of HK$77.9. The company's profitability improved significantly in Q3 2025, driven by a recovery in online marketing revenue and steady 15.2% growth in e-commerce GMV, supported by AI-driven content optimization, ad performance, and conversion enhancements.

**Key Financial Highlights** KUAISHOU-W reported Q3 revenue of RMB35.55 billion (+14.1% YoY), with gross margin at 54.7% (+0.3 ppts YoY). Operating profit surged 69.9% YoY to RMB5.30 billion, yielding a 14.9% operating margin (+4.9 ppts YoY). Adjusted net profit rose 26.3% YoY to RMB4.99 billion, with a 14.0% adjusted net margin (+1.3 ppts YoY).

**AI-Driven Growth** Average daily active users (DAU) and monthly active users (MAU) reached 416 million (+2.1% YoY) and 731 million (+2.4% YoY), respectively, with DAU/MAU at 56.9%. User engagement grew 3.6% YoY to 134.1 minutes per day. E-commerce GMV climbed 15.2% YoY to RMB385 billion, with short-video commerce maintaining robust growth and "pan-shelf" e-commerce contributing over 32% of GMV.

The upgraded Kling AI 2.5 Turbo model, launched in September 2025, reduced video production costs by nearly 30% while enhancing text response, dynamic effects, and aesthetics. Kling AI generated over RMB300 million in Q3 revenue. Additionally, the OneRec recommendation system boosted domestic online marketing revenue by 4%–5%.

**Online Marketing Recovery** Online marketing revenue rose 14.0% YoY to RMB20.10 billion, supported by growth in both external and internal ad spending, with UAX accounting for 70% of external ad consumption. Live-streaming revenue increased 2.5% YoY to RMB9.57 billion, while other services revenue jumped 41.3% YoY to RMB5.88 billion.

E-commerce buyer structure improved, with higher repurchase frequency. The OneSearch architecture drove a 5% increase in mall search orders, while OneRec contributed high single-digit GMV growth in e-commerce feeds.

**Risks** Potential challenges include intensifying competition, macroeconomic headwinds, and slower-than-expected AI monetization.