Yamato: Raise KUAISHOU-W (01024) target price to 72 Hong Kong dollars, clearer visibility driving AI business valuation reset.

Daiwa released a research report, stating that it will re-adjust the valuation basis of KUAISHOU-W (01024) core business and Kling AI, and decided to reiterate a "buy" rating on Kuaishou, raising the 12-month target price from 63 Hong Kong dollars to 72 Hong Kong dollars. Kuaishou has repurchased shares worth 854 million Hong Kong dollars this year, and its total return is expected to double from about 2% in 2025 to 2026. Daiwa stated that Kuaishou's first quarter performance in 2026 roughly met market expectations, with operating revenue increasing by 3.4% year-on-year to 33.716 billion RMB. The bank pointed out that "Kling AI" exceeded market expectations again, with first quarter revenue of 650 million RMB (a year-on-year increase of over 300%) and an annualized run rate (ARR) reaching 500 million dollars as of March. In addition, media reports in May stated that based on Kling AI's ARR, it is expected to reach 1.3 billion dollars in the first quarter of 2027 and is planning for a potential spin-off listing with a valuation of 20 billion dollars, further highlighting the clear path for the accelerated commercialization of Kling AI. The bank currently estimates that under a sum-of-the-parts (SOTP) valuation, Kling AI will contribute about 50% of the group's valuation, marking a structural shift in its investment narrative.