

Core Viewpoint - Goldman Sachs maintains a "Buy" rating for Kuaishou-W (01024) with a 12-month target price of HKD 62, based on a price-to-earnings valuation of 12 times the average expected earnings per share for 2025-2026 [1] Group 1: Artificial Intelligence Strategy - Kuaishou's management believes it has a technological advantage in its AI strategy, particularly in Kuaishou's AI video generation capabilities, supported by a large dataset of labeled videos and a strong talent pool of algorithm engineers [2][3] - The company expects Kuaishou's AI business revenue to reach USD 60 million by 2025, with 70% of revenue coming from consumer subscriptions and 30% from B2B clients [3] - Management aims to capture a significant share of the total addressable market in the video production industry, including films, TV shows, and advertisements [3] Group 2: Advertising Business - Management anticipates a 7-8% year-over-year growth in advertising revenue for Q1 2025, with a target of 14-15% growth for the entire year [2][5] - The company has observed sequential improvement in advertising performance and expects a return to normal seasonal growth starting in Q2 2025 [5] - Key drivers for advertising growth include contributions from new mini-game verticals and monetization of e-commerce traffic [5] Group 3: E-commerce Business - Kuaishou expects a 13% year-over-year growth in gross merchandise value (GMV) for 2025, primarily driven by general e-commerce, while live e-commerce is projected to grow in single digits [2][7] - The company views monthly active customers as a key growth driver, with an increase in average order value due to product mix optimization [7] - Kuaishou plans to maintain stable commission rates in 2025 to support small and medium enterprises, offset by monetization from general e-commerce traffic [7] Group 4: Capital Expenditure - Kuaishou's total capital expenditure is projected to be between RMB 10-15 billion in 2025, with a significant portion allocated to AI-related investments [4] - The company has achieved breakeven at the gross profit level for its AI video generation business [4]