CMSC: Kuaishou-W(01024) first quarter performance beats expectations, commercialization potential accelerating realization.

CMSC issued a research report stating that it maintains a "buy" rating on KUAISHOU-W (01024) and a target price of HK$64, corresponding to a P/E ratio of 15 times/13 times for the 2026/2027 fiscal years after adjustment. The bank believes that Kuaishou is at a key turning point in AI-driven content ecosystem reshaping and commercial value unlocking, with potential to verify the certainty of the second growth curve through faster-than-expected commercialization speed and leading market position. The global penetration of AI, such as AI comic dramas, AI marketing agents, and AI e-commerce searches, continues to inject incremental growth into traditional businesses. The company has ample cash reserves, with an annual shareholder return of approximately 4%, maintaining strong financial discipline while firm in AI investment. Kuaishou's performance in the first quarter of 2026 exceeded expectations, with total revenue of 33.7 billion RMB, a 3.4% year-on-year increase, slightly better than the market's 1% expectation. Online marketing revenue was 19.6 billion RMB, a 9.3% year-on-year increase, surpassing expectations by 1%, mainly due to the explosive growth of AI comic dramas and strong demand for AI application advertising; The growth rate of domestic online marketing revenue in the first quarter exceeded 10%, with AI large models contributing 3-4% to the growth of domestic marketing revenue. The report indicates that other service revenue in the first quarter was 5.6 billion RMB, a 15.9% year-on-year increase, 2% higher than expected, mainly due to the Kuaishou AI single-season revenue exceeding 650 million RMB, significantly exceeding expectations by 29%; Live streaming revenue was 8.5 billion RMB, a 13.5% year-on-year decrease, in line with expectations, reflecting the ongoing governance of the entertainment live streaming ecosystem.