Daiwa Raises KUAISHOU-W TP to HKD72; Clearer Visibility Drives AI Business Re-rating

Daiwa issued a research report stating that KUAISHOU-W (01024.HK) -0.360 (-0.795%) Short selling $256.55M; Ratio 15.734% 's 1Q26 results were broadly in line with market expectations. Revenue rose 3.4% YoY to RMB33.716 billion, while adjusted net profit fell 26% YoY, mainly due to higher artificial intelligence (AI)-related costs, but still exceeded market expectations by 8%, primarily supported by investment gains. The broker noted that "Kling AI" (Kling AI) once again outperformed market expectations, recording revenue of RMB650 million in 1Q26 (up more than 300% YoY). Its annualized run rate (ARR) reached USD500 million as of March. In May, media reports indicated that Kling AIs ARR is expected to reach USD1.3 billion in 1Q27, and it is planning a potential spin-off listing at a valuation of USD20 billion, further highlighting a clear path toward accelerated commercialization. Daiwa currently estimates under a sum-of-the-parts (SOTP) valuation that Kling AI will contribute about 50% of the groups valuation, marking a structural shift in its investment narrative.Daiwa added that despite the AI-driven boost, Kuaishous core business performance remains constrained. Advertising revenue grew 9% YoY, with AI contributing 3 to 4 ppts of uplift, but growth was still limited by traffic constraints. Monthly active users (MAU) rose 8% YoY, outpacing the 1% YoY growth in daily active users (DAU), reflecting limited room for improvement in user engagement. Live-streaming revenue declined 14% YoY due to ecosystem governance measures, while e-commerce monetization was dragged by macro weakness and merchant subsidies. Gross margin in 1Q26 fell 3.4 ppts YoY to 51.2%, mainly due to AI-related costs including bandwidth, servers and depreciation. In addition, Kuaishou has repurchased shares worth HKD854 million so far this year, and its total yield is expected to double from about 2% in 2025 to 2026.Taking into account weak trends in the core business, Daiwa lowered its 20262027 EPS forecasts by 5% to 8%. However, the broker adjusted the valuation bases for both Kuaishous core business and Kling AI, reiterated its Buy rating on KUAISHOU-W (01024.HK) -0.360 (-0.795%) Short selling $256.55M; Ratio 15.734% , and raised its 12-month TP from HKD63 to HKD72. (ad/u)(HK stocks quote is delayed for at least 15 mins.Short Selling Data as at 2026-05-28 12:25.)