CICC: Maintains KUAISHOU-W (01024) outperform rating, target price of HKD 72.8.

CICC released a research report stating that it maintains its Non-IFRS net profit forecast for KUAISHOU-W (01024) for the years 2026 and 2027. The current price corresponds to 10/8 times 2026/2027 Non-IFRS P/E. It maintains an outperform industry rating and, considering the structural transformation of the company's business, the valuation method has been adjusted from PE to SOTP segment valuation, with a target price of HKD 72.8 (16/14 times 2026/2027 Non-IFRS P/E), representing an upside potential of 61%. Key points from CICC are as follows: 1Q26 revenue met the bank's expectations, profits exceeded expectations The company's 1Q26 revenue was 33.7 billion yuan, a 3% increase year-on-year, in line with the bank's and market expectations (with revenue from Keliin exceeding the bank's expectations); Non-IFRS net profit attributable to shareholders was 3.37 billion yuan, exceeding the bank's and market expectations, mainly due to other income net amounts being higher than the bank's expectations. AI deeply empowers advertising and e-commerce, with a steady core business growth 1) Online marketing services: 1Q26 revenue increased by 9% year-on-year, with domestic revenue growth exceeding 10%. In terms of industry breakdown, growth in non-e-commerce marketing services was driven by content consumption (Quickly's platform's daily marketing expenditure peak exceeded 20 million yuan as of the end of March 2026), life services, and AI applications. In terms of AI penetration, in terms of materials, AIGC short video material consumption accounted for 10% of the platform's short video marketing total consumption; in terms of ad placements, the company stated that generative recommendation and intelligent bidding large models drove an approximate 3-4% increase in domestic marketing services revenue. 2) E-commerce: Healthy growth was achieved in 1Q26, with quarterly GMV from brand merchants increasing by over 25%. In terms of AI, frameworks such as OneSearch V2 drove a 3% increase in GMV for e-commerce search business. In terms of regions, the operating loss of the overseas segment in 1Q26 decreased quarter-on-quarter to 31 million yuan, with stable DAU and usage time in the Brazilian market. Keliin's AI commercialization is advancing rapidly, with leading global technology Keliin's revenue in 1Q26 exceeded 650 million yuan, a year-on-year increase of over 300%; with ARR in March 2026 nearing 500 million USD. In terms of models, the online launch of the Keliin 3.0 series further strengthens professional-level video creation capabilities. In terms of applications, Keliin is deeply involved in the visual effects production of mature commercial film and television works at home and abroad, with continued penetration in professional scenes such as film, advertising, and e-commerce, and its commercialization capabilities remain at the forefront of the global video generation track. Adequate cash flow supports long-term AI deployment At the company's 1Q26 performance conference, it was stated that it maintains its capital expenditure guidance of 26 billion yuan for this year, with the majority occurring in the first half of the year, ensuring good control over computing costs; meanwhile, the goal is to maintain a positive group cash flow for the full year. As of the end of 1Q26, the company's total available funds reached 117.7 billion yuan, providing a solid financial foundation to support the long-term development in the AI era and shareholder returns. Risk warning: AI technology development falls short of expectations; intensified industry competition; high computing costs; unplanned spin-off plans; slowdown in core business; changes in industry policies.