Orient: Maintain a "buy" rating on KUAISHOU-W (01024) with a target price of HKD 74.06.

Orient issued a research report stating that the adjusted net profit attributable to the mother of KUAISHOU-W (01024) in 2026-2028 is forecasted to be 17-18.5 billion CNY. Referring to comparable companies, the company is valued at 17xPE in 2026, corresponding to a fair value of 281.6 billion CNY, equivalent to 322 billion HKD (Hong Kong dollar to RMB exchange rate of 0.875). The target price is 74.06 HKD per share, maintaining a "buy" rating. Orient's main points are as follows: The Kuaishou-W model has both leading capabilities and cost-effectiveness, focusing on creating differentiation in the 4K video sector. From a model capability perspective, according to the Artificial Analysis video rankings, domestic models such as Alibaba's Happyhorse-1.0, ByteDance's Seedance2.0, and Kuaishou's Keling3.0 rank in the top 3. Since the release of the Keling 1.0 version in June 2024, although the competitive landscape has changed with the introduction of new models, the Keling series' model capabilities have consistently remained in the top tier, leading in technological strength. In terms of price, the API prices for generating 1-minute videos are 14.4 USD, 22.4 USD, and 13.4 USD respectively for Happyhorse-1.0, Seedance2.0, and Keling3.0, with Keling showing a more outstanding performance in terms of comprehensive price comparison. In terms of feature iterations, Keling recently launched the 4K video output feature, with creators providing feedback that the deliverability is stronger in areas with stricter delivery requirements such as advertising and film production. Optimistic about the strong demand for downstream AI dramas, driving high growth in Keling's ARR. Sensor Tower data shows that Keling's mobile revenue increased by 24% and 10% respectively in March and April 2026, with MAU data maintained at a relatively high level of over 7 million. The growth is mainly driven by usage penetration. In terms of downstream content scenarios, the number of AI dramas in March increased by 138% compared to January. The company believes that technology suppliers are likely to benefit from the high prosperity of downstream AI genre content, and Keling, as a model with leading capabilities and cost-effectiveness, is expected to continue to perform well commercially as scenario expansion may lead to sustained high growth. Increased CapEX investment, considering depreciation added back, core business profit steadily grows. CapEX investment in 2026 increased by 11 billion to 26 billion CNY compared to 2025. Considering a 4-5 year straight-line depreciation method, the negative impact on profit growth in 2026 is estimated to be 2.2-2.75 billion CNY. If considering depreciation added back, the core business profit is expected to continue to grow steadily. Risk factors: - Macroeconomic consumption recovery is slower than expected - Domestic commercial efficiency is lower than expected - Increasing losses in overseas business - Technology iteration of Keling is slower than expected.