Investment Rating - The report maintains a "Buy" rating for Kuaishou Technology with a revised 12-month price target of HK$63.00, indicating an upside potential of 29.2% from the current price of HK$48.75 [1]. Core Insights - Kuaishou reported in-line results for 1Q25 and maintained its FY25 guidance on advertising, eCommerce, and profitability, with a positive outlook on growth momentum for the remainder of the year [1][19]. - The advertising momentum is expected to improve, with management targeting a 12% year-on-year growth in 2Q25 and further acceleration anticipated in the second half of the year [2][34]. - The eCommerce segment is projected to achieve 13-15% year-on-year GMV growth, supported by stable livestreaming and a focus on enhancing merchant ROI through AI tools [3][37]. - The Kling monetization outlook has been raised significantly, with FY25 revenue expectations increased to US$100 million, reflecting a rapid expansion of paying users [4][22]. Summary by Sections Advertising - Management anticipates a 12% year-on-year growth in advertising for 2Q25, with expectations for high-teens growth in the second half of the year driven by contributions from mini-games and local services [34]. - The advertising target for FY25 remains unchanged at approximately 14% year-on-year growth [34]. eCommerce - Kuaishou aims for 13-14% year-on-year GMV growth in 2Q25, with a stable overall take rate of around 4% for 2025 [37]. - The company plans to start monetizing pan-shelf based eCommerce traffic to improve the take rate from nearly 0% to approximately 1-2% in the second half of 2025 [38]. Kling AI - The revenue outlook for Kling AI has been raised to US$100 million for FY25, driven by a growing base of paying users and enhanced marketing efforts [4][22]. - The revenue mix indicates that 70% of Kling AI revenue comes from subscriptions, primarily from professional content creators, while 30% is derived from API calling revenue [23]. Financial Projections - Revenue estimates for 2025-2027 have been fine-tuned upwards by 0.7% to 1.1%, reflecting better-than-expected performance in livestreaming and other services [19][21]. - The projected total revenue for 2025 is Rmb 140,739 million, with net income expected to be Rmb 19,104 million [17][21].
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