Kunlun(SZ:300418) HTSC·2024-10-31 03:00Investment Rating - The report maintains a "Buy" rating for the company [2][5][21]. Core Views - The company reported Q3 revenue of 1.327 billion RMB, a year-over-year increase of 5.62% and a quarter-over-quarter increase of 2.5%. However, it incurred a net loss of 237 million RMB, which aligns with previous forecasts [2]. - The company has made significant advancements in AI applications, including the launch of the SkyReels platform, which integrates video and 3D models, and the development of AI games [3][19]. - The report highlights a substantial increase in R&D and management expenses due to AI investments and stock incentive costs, with R&D expenses rising by 1.18 billion RMB year-over-year [4][9]. - The profit forecast has been adjusted downward due to increased R&D costs and uncertain investment returns, with expected net losses of 2.2 billion RMB, 3.2 billion RMB, and 4.1 billion RMB for 2024-2026 [5][9]. Summary by Sections Financial Performance - Q1-Q3 revenue reached 3.828 billion RMB, a 4% year-over-year increase, while the net loss for the same period was 627 million RMB, compared to a profit of 328 million RMB in the previous year [2]. - The company’s gross margin for Q3 was 74.5%, maintaining a high level despite increased expenses [4]. R&D and Management Expenses - Management expenses increased by 250 million RMB year-over-year, with a management expense ratio of 30.6%, reflecting an 18.2 percentage point increase [4]. - R&D expenses rose by 1.18 billion RMB year-over-year, with an R&D expense ratio of 29.2% [4]. Valuation and Price Target - The target market value for the company is estimated at 55.96 billion RMB, corresponding to a target price of 45.46 RMB per share [5][21]. - The report employs a step-by-step valuation method, considering various business segments and their respective market values [21][22]. AI Business Development - The company is expanding its AI product matrix, including the launch of multiple platforms and applications, which are expected to enhance its competitive edge in the market [19][20].