First Shanghai Securities·2025-08-25 09:21Investment Rating - The report assigns a "Buy" rating to the company with a target price of HKD 100, representing a potential upside of 34% from the current price of HKD 74.9 [2] Core Insights - The company's revenue and profit exceeded expectations, with a notable focus on shareholder returns, marking the first dividend distribution since its listing [5] - The company reported a total revenue of RMB 350.46 billion for Q2 2025, reflecting a year-on-year growth of 13.1%, driven by user engagement, a thriving content ecosystem, and AI-enabled business [5] - The adjusted net profit for Q2 2025 reached RMB 56.18 billion, a 20.1% increase year-on-year, with an adjusted net profit margin of 16% [5] - The company has a robust financial position, with cash and cash equivalents amounting to RMB 123 billion and total available funds of RMB 1,019 billion as of March 31 [5] Revenue and Profit Summary - Total operating revenue for the fiscal year ending December 31 is projected to grow from RMB 113,470 million in 2023 to RMB 165,167 million by 2027, with a compound annual growth rate (CAGR) of approximately 11.8% [4] - Net profit is expected to increase significantly from RMB 6,399 million in 2023 to RMB 24,707 million by 2027, reflecting a CAGR of 39.5% [4] - The adjusted net profit is forecasted to rise from RMB 10,271 million in 2023 to RMB 27,056 million in 2027, indicating a strong growth trajectory [4] Business Performance Highlights - The company's online marketing services revenue reached RMB 198 billion, up 12.8% year-on-year, attributed to active customer expansion and AI technology optimization [5] - E-commerce gross merchandise volume (GMV) grew by 17.6% year-on-year to RMB 358.9 billion, with an average monthly buyer count of 134 million [5] - The live streaming business generated RMB 100 billion in revenue, marking an 8.0% increase year-on-year, showcasing strong performance in differentiated online and offline scenarios [5] AI Strategy and Market Potential - The company launched the Keling AI 2.1 series in May, establishing a tiered service and pricing model, with revenue exceeding RMB 2.5 billion in Q2 2025 [5] - Keling AI has begun to penetrate industrial-grade applications, including game production and professional film creation, indicating a clear monetization path and vast market potential [5] Shareholder Returns and Financial Health - The company announced its first special dividend of HKD 0.46 per share, totaling approximately HKD 2 billion, reflecting its commitment to shareholder returns [5] - Since announcing a buyback program of HKD 16 billion in May 2024, the company has repurchased HKD 8.8 billion worth of shares, demonstrating strong financial health and confidence in future growth [5]