KUAISHOU(HK:01024) 美股IPO·2025-08-13 05:37Core Viewpoint - Morgan Stanley believes Kuaishou is the most undervalued AI stock, significantly raising its target price from HKD 71 to HKD 88, indicating a potential upside of 22% and reaffirming it as the top pick in China's digital entertainment sector [2][11]. Kuaishou's AI Business Outlook - The revenue forecast for Kuaishou's AI video generation tool, Keling, has been raised by 61%, with expected revenues for 2025 and 2026 now at RMB 12 billion and RMB 19 billion respectively, driven by strong performance in Q2 2025 [3]. - Keling's monthly revenue exceeded RMB 1 billion in April and May, and concerns about cash flow fluctuations are considered overblown, as most revenue comes from the PC side rather than mobile [3]. Advertising and E-commerce Business - Kuaishou's core advertising and e-commerce business is seen as undervalued, with a projected compound annual growth rate (CAGR) of 13% for advertising and e-commerce commission revenue from 2026 to 2027 [6]. - The user base remains stable, unaffected by the rapid growth of WeChat's video accounts, and the shift towards higher-margin advertising and e-commerce is expected to boost profit margins, leading to a projected 20% CAGR in profits from 2026 to 2027 [6]. Business Model and Market Strategy - Kuaishou's entry into the food delivery sector is based on a light-asset model, partnering with established companies like Meituan rather than building its own logistics, which minimizes upfront investment and creates additional monetization opportunities through service commissions [5]. Valuation and Growth Potential - Despite a 73% rebound in Kuaishou's stock price year-to-date, the valuation remains attractive, with a current price corresponding to 14/11 times the expected earnings for 2025/2026, while the forecasted profit CAGR for 2026-2027 is 20% [9]. - The target price of HKD 88 is based on a 14x multiple of the expected earnings for 2026, reflecting optimism about the acceleration of core advertising growth and Keling's strong momentum [11].