Kunlun(SZ:300418) ZHESHANG SECURITIES·2026-02-04 10:24Investment Rating - The report initiates coverage with a "Buy" rating for Kunlun Wanwei [7][9]. Core Insights - Kunlun Wanwei 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 company has released multiple leading industry models and established a comprehensive AI application matrix, enhancing its platform influence and commercialization ability [2]. - The world model technology positions Kunlun Wanwei ahead globally, with the Matrix 3D model and Matrix-Game 2.0 providing significant future growth potential [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 user conversion rates improve [19]. - The competition is led by two major players, with DramaWave rapidly rising to fourth place in terms of downloads and revenue [26][29]. - The platform employs a "paid + free" dual model, effectively covering various user segments and leveraging AI for content localization and monetization [33][36]. AI Application Ecosystem - Kunlun Wanwei is building a robust AI ecosystem centered around the Skywork Super Agents, with significant advancements in AI software technology revenue, reaching $65 million in the first half of 2025 [43]. - The AI application chain is developing in a closed-loop manner, enhancing product performance and market competitiveness [44]. - The company aims to create a "Spotify for AI" by leveraging its technological advantages and targeting a global user base [52]. Financial Forecast and Valuation - Revenue projections for 2025-2027 are estimated at 82 billion, 117 billion, and 148 billion yuan, respectively, with a net profit forecast of -1.61 billion, -0.94 billion, and 0.44 billion yuan [67]. - The SOTP valuation method suggests a target market value of 932 billion yuan, corresponding to a target price of 74.3 yuan per share [67].