Guotai Haitong: Maintains "Buy" rating for KEEP (03650) with a target price of 7.7 Hong Kong dollars.

Guotai Haitong released a research report stating that it maintains a "buy" rating on KEEP (03650), raising the company's adjusted net profit forecast for 2025-27 to 0.1/0.9/2.01 billion Chinese yuan, with growth rates of 102/772/124%. Taking into account comparable company valuations, the company is given a 2 times PS for 2025, with a target price of 7.7 Hong Kong dollars. The company's H1 revenue was 822 million yuan, a decrease of 20.8%, with an adjusted net profit of 10.35 million yuan (compared to a loss of 160 million yuan in the same period last year). The company's profitability was mainly achieved through a focus on AI, strategic transformation, active streamlining of non-core low-efficiency businesses, and optimization of product structure. Guotai Haitong's main points are as follows: Steady increase in gross profit margin, optimized cost structure 1) H1 gross profit margin was 52.2%, up 6.2 percentage points, due to business structure optimization and cost reduction; self-owned sports products 34.8%, online membership and paid content 71.3%, advertising and others 57.5%, due to reducing the scale of low-margin businesses and optimizing advertising production costs; 2) expense ratio 61.5%, down 0.85 percentage points, with fulfillment/marketing/administrative/research and development expense ratios at 5.33/27.2/10.1/19.8% respectively, year-on-year changes of -0.64/-3.98/+1.35/+0.9 percentage points; 3) adjusted net profit margin 1.3%, up 16.8 percentage points. Operations are more efficient, and user subscription penetration rate is increasing. 1) H1 revenue breakdown: self-owned sports products 3.97 billion yuan, online membership and paid content 3.37 billion yuan, advertising and other 0.88 billion yuan; 2) average monthly active users 22.486 million, subscription members 2.787 million, subscription penetration rate 12.4%, up 1.3 percentage points, average monthly revenue per active user 6.1 yuan, up 0.3 yuan. Stepping up the construction of an AI-native intelligent body, deepening core tool strategies 1) Milestones achieved in key AI areas in H1, including: implementation of multi-intelligent agent systems, iterative development of AI coaching core functions, and innovation in AI-generated content workflows; 2) AI coach Kaka: According to the latest data in July, the AI core daily active users (DAU) exceeded 150,000, with AI diet recording showing significant retention advantages in typical high-frequency demand scenarios, covering 1/3 of AI dialogue users, with a next-day retention rate of 50%, and a retention rate of 79% for App DAU; 3) Focus on advertising business to build the city road race IP event K-MARS (City K Marathon): leveraging the accumulation of grassroots running events, accurately targeting the core running population, laying the foundation for scalability from single events to multiple events. Risk factors: increased industry competition, AI commercialization lower than expected, risk of user churn, etc.