Citi raises KUAISHOU-W target price to 95 yuan, optimistic about the growth potential of KuaLing AI

Citi published a research report indicating that KUAISHOU-W (01024.HK) is likely to announce its performance around the end of March, with expected revenue and adjusted earnings broadly in line with market expectations. Given the current policy developments and high base effect, the bank maintains its forecast that the gross merchandise volume (GMV) growth will slow to 13% in the fourth quarter of 2025. Despite ongoing pressure from overseas advertising business, the efficiency improvements brought by artificial intelligence, along with strong performances in verticals such as short dramas, comic dramas, and mini-games, are expected to drive domestic advertising business. Citi anticipates that KuaLing AI will achieve strong year-on-year revenue growth for the entire year. The bank has incorporated KuaLing AI's good growth momentum into its valuation model and raised the target price from HKD 88 to HKD 95, with a rating of "Buy."

The bank forecasts that Kuaishou's total revenue in the fourth quarter will grow by 9.6% year-on-year to RMB 38.8 billion (the same below), consistent with market consensus. The growth drivers are expected to come from live streaming, advertising, and other services, which are projected to decline by 3%, increase by 12%, and increase by 22.5%, respectively, assuming GMV grows by 13% year-on-year. Benefiting from the seasonal shift in revenue structure towards advertising and e-commerce, the gross margin is expected to rise from 54.7% in the third quarter to 55.5%; however, due to increased research and development costs for artificial intelligence, the adjusted operating profit margin is estimated to be 16.1%, lower than the 16.7% in the third quarter. Adjusted earnings are expected to be RMB 5.4 billion, in line with market consensus.

In terms of core business outlook, Citi expects that live streaming e-commerce growth will still outpace traditional e-commerce platforms in 2026, but policies related to value-added tax and traffic advertising may introduce uncertainties to the growth trajectory. The bank believes that Kuaishou will continue to strengthen traffic support for KOLs and shelf e-commerce to drive GMV growth while continuing to improve artificial intelligence tools to enhance advertising efficiency