Key Takeaways:
- Daiwa raised Kuaishou's 12-month target price to HKD72 from HKD63
- Kling AI generated RMB650M in 1Q26 revenue, up more than 300% year over year
- The AI unit's ARR reached USD500M in March, with a potential USD20B spin-off valuation
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Daiwa raises Kuaishou target to HKD72 on Kling AI revenue surge
Daiwa raised Kuaishou Technology's (01024.HK) 12-month target price to HKD72 from HKD63, reiterating a Buy rating, as the AI video generator Kling drives a structural re-rating of the group's valuation.
"Kling AI once again outperformed market expectations," Daiwa analysts wrote in a research report, noting the unit recorded revenue of RMB650 million in the first quarter, up more than 300% year over year. The annualized recurring run rate reached USD500 million as of March, and media reports indicate Kling's ARR could reach USD1.3 billion by the first quarter of 2027, with a potential spin-off listing at a USD20 billion valuation.
Kuaishou's first-quarter results were broadly in line with expectations. Revenue rose 3.4% year over year to RMB33.716 billion, while adjusted net profit fell 26% to RMB3.37 billion — still beating market forecasts by 8%, supported by investment gains. Gross margin contracted 3.4 percentage points to 51.2%, driven by AI-related costs including bandwidth, servers and depreciation.
Daiwa estimates Kling AI will contribute about 50% of the group's valuation under a sum-of-the-parts model, marking a structural shift in the investment narrative. The core business, however, showed mixed performance. Advertising revenue grew 9% year over year, with AI contributing 3 to 4 percentage points of uplift, though growth was constrained by traffic limits. Live-streaming revenue declined 14% year over year amid ecosystem governance measures, while e-commerce monetization faced headwinds from macro weakness and merchant subsidies.
Daiwa lowered its 2026 and 2027 earnings per share forecasts by 5% to 8% to reflect weak core business trends, but adjusted the valuation bases for both the core business and Kling AI. The broker joins UBS, which also raised its target price to HKD70 from HKD68 with a Buy rating, citing Kling's accelerating commercialization. UBS expects Kling's second-quarter revenue to reach RMB840 million.
Kuaishou has repurchased shares worth HKD854 million so far this year, with total yield expected to double from about 2% in 2025 to 2026. The Daiwa upgrade signals that Kling AI's monetization trajectory is becoming the primary driver of the group's equity value. Investors will watch for further details on the potential Kling spin-off, which could unlock additional shareholder value.
This article is for informational purposes only and does not constitute investment advice.
[1] Daiwa Raises KUAISHOU-W (01024.HK) TP to HKD72; Clearer Visibility Drives AI Business Re-rating[2] Kuaishou beats estimates as Kling AI video generator’s revenue jumps 300%[3] Daiwa Raises KUAISHOU-W (01024.HK) TP to HKD72; Clearer Visibility Drives AI Business Re-rating - AASTOCKS.com[4] UBS Raises KUAISHOU-W (01024.HK) TP to HKD70; 1Q26 Results In Line - AASTOCKS.com
