Kunlun(SZ:300418) ZHESHANG SECURITIES·2026-02-04 08:40Investment Rating - The report initiates coverage with a "Buy" rating for the company [9]. Core Insights - The company has completed the full industry chain layout of "computing power - model - AI application," transitioning from an investment phase to a monetization phase in 2026 [1]. - The short drama business has achieved an annualized revenue of over $240 million in 2025, validating its commercialization capability [1]. - The DramaWave platform has shown significant growth, ranking third in overseas short drama revenue as of August 2025, with a month-on-month revenue increase of 35.4% in December 2025 [2]. - The AI applications, particularly the TianGong Super Intelligent Agent, are expected to drive a second growth curve, with anticipated revenue growth in 2026 [2]. Summary by Sections Short Drama Business - The overseas short drama market is still in the early stages of penetration, with significant growth potential as the user base expands [19]. - The DramaWave platform has adopted a dual monetization model of "paid + free," effectively covering various consumer segments and achieving a 900% year-on-year revenue growth to reach 1.68 billion yuan in 2025 [18][19]. - The competitive landscape features two major players leading the market, with DramaWave rapidly rising to fourth place in terms of downloads [27]. AI Application Ecosystem - The company has built a comprehensive AI application matrix centered around the TianGong Super Intelligent Agent, which has shown strong commercial potential [43]. - The AI software technology revenue reached 65 million yuan in the first half of 2025, indicating the initial stages of commercialization [43]. - The Mureka AI Music platform is transitioning from a tool to a content and traffic entry point, with significant cost reductions in music production [49]. World Model Technology - The company has positioned itself as a leader in world model technology, with the Matrix-3D model enabling real-time interactive content generation, which is crucial for future growth [60][62]. - The Matrix-Game 2.0 model represents an upgrade in interactive world modeling, opening up new opportunities for the company [62]. Financial Forecast and Valuation - Revenue projections for 2025-2027 are estimated at 8.2 billion, 11.7 billion, and 14.8 billion yuan, respectively, with a target market capitalization of 93.2 billion yuan based on a sum-of-the-parts (SOTP) valuation method [7][66]. - The report suggests that the company can be valued based on different segments, including short dramas, AI applications, and gaming, using various valuation methods [5][67].