Citigroup raises the target price of KINGSOFT CLOUD to $22, optimistic about growth driven by strong AI demand

Citi published a research report indicating that Kingsoft Cloud (03896.HK) had a solid performance in the fourth quarter of last year, with total revenue increasing by 24% year-on-year to RMB 2.76 billion, slightly above market expectations, primarily driven by strong AI demand, which propelled public cloud service revenue to grow by 35% year-on-year.

The bank expects that, benefiting from the parent company's ongoing push for AI development and the strong demand for artificial intelligence computing across various vertical industries, Kingsoft Cloud's public cloud service growth momentum will further accelerate this year. Meanwhile, industry cloud service revenue is likely to remain relatively stable year-on-year, with limited growth. Given the strong operating leverage from rapid revenue growth, it is estimated that the gross margin will remain roughly stable year-on-year, and adjusted operating profit is expected to reach breakeven this year.

Considering the strong demand for AI computing, Citi raised its revenue forecasts for Kingsoft Cloud for the next two years by 14% and 19%, respectively. The target price for Kingsoft Cloud (KC.US) in the U.S. stock market has been raised from $20 to $22, maintaining a "Buy" rating, optimistic about the company's robust revenue outlook, and viewing industry price increases and further advancements in Xiaomi's artificial intelligence as key catalysts