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<Research> JPM Upgrades KUAISHOU-W (01024.HK) to Overweight, Raises TP to HKD71
Recommend 40 Positive 55 Negative 20 |
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JPM released a research report upgrading KUAISHOU-W (01024.HK) from Neutral to Overweight and raising its TP through December 2026 from HKD48 to HKD71. The bank expects the value of KUAISHOU-W’s Kling AI to be unlocked over the next 12 months. Based on the company’s recent announcements and media reports, Kling AI’s plan to seek external financing will trigger a re-rating. JPM currently values Kling AI at USD3.5 billion, supported by an expected 2027 price-to-sales (P/S) multiple of 30x (KUAISHOU-W’s current market capitalization is USD25 billion). In addition, Kling AI’s growth has exceeded expectations. The bank raised its 2026 and 2027 revenue forecasts for Kling AI by 34% and 64%, respectively, and expects revenue to grow 250% and 104% in 2026 and 2027. Demand from global enterprises and professional users remains strong, with over 70% of Kling AI’s revenue coming from overseas markets. Its revenue mix between API and subscription is 60:40. Meanwhile, the competitive landscape is becoming more rational, with ByteDance’s Seedance raising prices in 2Q, while major US peers (Google and OpenAI) are focusing on AI coding rather than video generation. JPM noted that KUAISHOU-W’s current share price offers downside protection. The company holds USD13 billion in net cash, accounting for 52% of its market capitalization. After deducting net cash and its stake in Kling AI (valued at USD17 billion, with KUAISHOU-W currently holding 100% and JPM applying a 50% holding company discount), the implied value of the remaining short-video business is negative, even though the bank expects the core short-video segment to generate about USD3 billion in profit in 2026. JPM highlighted that Kling AI’s exponential growth continues. Its revenue in 1Q26 surged 4x YoY, and annual recurring revenue (ARR) reached USD500 million in March 2026. ARR is expected to exceed USD1 billion in 1H27. Kling AI is gradually penetrating individual video creators and professional video content developers. According to JPM’s analysis, Kling AI’s total addressable market (TAM) is USD108 billion (primarily advertising and professional video production), while its current penetration rate is below 1%. JPM expects new version launches, updates on equity financing, and further ARR growth at Kling AI to serve as key share price catalysts. Although the bank forecasts KUAISHOU-W’s core business (excluding Kling AI) revenue to decline 1% YoY in 2Q due to a high e-commerce base last year, recovery in core revenue in 2H26 and 2027 - potentially driven by the fading high base effect in livestreaming in 2027 and accelerated growth in AI short-drama advertising in 2H26 - should also support the share price. However, JPM trimmed its 2026 and 2027 adjusted EPS forecasts by 5.4% and 3.3% to RMB3.66 and RMB4.09, respectively. (ad/da) Auto-translated by AI This article was automatically translated by AI, the original language version should be considered the authoritative version. AASTOCKS.com Limited does not guarantee its accuracy or completeness and accepts no liability for any damages or losses arising from the use of this translation. More Details
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