Summary of Hang Seng Indexes Rebalancing Review and Flow Industry Overview - The report focuses on the Hang Seng Indexes, specifically the Hang Seng Index (HSI), Hang Seng China Enterprises Index (HSCEI), Hang Seng TECH Index (HSTECH), and Hang Seng Composite Index (HSCI) [1][2]. Key Points and Arguments Constituent Changes - Pop Mart (9992.HK), China Telecom (728.HK), and JD Logistics (2618.HK) will be added to the HSI, increasing the total number of constituents from 85 to 88 [2]. - Pop Mart will replace J&T Global Express (1519.HK) in the HSCEI [2]. - No changes were made to the HSTECH [2]. - A total of 24 stocks were added and 22 removed from the HSCI [2]. Index Weight Adjustments - The weights of the HSI, HSCEI, and HSTECH will be adjusted by 2.5%, 2.9%, and 5.7% respectively after rebalancing [2]. - The proforma index cap is expected to rise to US$2,090 billion for HSI (+1.6%), US$1,420 billion for HSCEI (+1.1%), and US$480 billion for HSTECH (+9%) [3]. Valuation Changes - The forward 12M P/E ratios and EPS growth rates are projected to change as follows: - HSI: from 11.3x to 11.4x and EPS growth from 5.4% to 5.7% - HSCEI: from 10.7x to 10.8x and EPS growth from 6.3% to 6.6% - HSTECH: from 17.6x to 18.0x and EPS growth from 17.5% to 16.8% [3]. Passive AUM Tracking - Passive AUM tracking the Hang Seng Family of Indexes reached nearly US$90 billion, accounting for approximately 3% of the Hang Seng Composite Index free float [3]. Sector Implications - Consumer Retail, Software & Services, and Autos are expected to see the largest passive inflows, estimated between US$300 million to US$780 million [4]. - Conversely, Internet/Media & Entertainment, Tech Hardware & Semis, and Banks may experience outflows ranging from -US$270 million to -US$950 million [4]. Stock Implications - The top six stocks expected to see the largest passive net buying flows include: - Horizon Robotics, Pop Mart, BYD, Meituan, Xiaomi, and Alibaba, with potential inflows ranging from US$185 million to US$610 million [4]. - Stocks anticipated to face the largest outflows include Tencent, SMIC, Kuaishou, and JD, with outflows ranging from -US$150 million to -US$550 million [4][9]. Historical Performance Patterns - Current additions to the HSCEI and HSCI have outperformed typical past patterns pre-announcement, while the HSI has shown less volatility [9]. - Historical performance tends to reverse after the first day following the announcement for HSI, while HSTECH stabilizes and HSCEI shows volatility [9]. Southbound Implications - Changes in HSCI constituents typically affect Southbound (SB) eligibility, with historical ownership rising by 1 percentage point within two days after inclusion becomes effective [10]. Additional Important Insights - The report emphasizes that investors should consider this analysis as one of many factors in their investment decisions [7]. - The report includes detailed data on potential passive flows, trading patterns, and sector weight changes, which are crucial for understanding market dynamics post-rebalancing [15].

Kuaishou Technology (1024.HK) Earnings Review Summary Company Overview - **Company**: Kuaishou Technology - **Ticker**: 1024.HK - **Market Cap**: HK$305.9 billion / $39.2 billion - **Industry**: Technology, specifically in the areas of Games, Entertainment, and Healthcare Tech Key Financial Highlights - **2Q25 Performance**: - Sales increased by 13% year-over-year (yoy) - Profit rose by 20% yoy, exceeding expectations by 10% [1] - Core business revenue from advertising and eCommerce commissions grew by 14% yoy, with Gross Merchandise Volume (GMV) up 18% yoy [1] - **Annual Revenue Target**: - Kuaishou raised its annual revenue target for Kling to $125 million for FY25, up from $100 million [4] - **Earnings Estimates**: - Revenue estimates for 2025-2027 have been increased by 1-4% due to better-than-expected livestreaming and eCommerce commission revenue [19] - EPS estimates for 2025-2027 raised by 4-5% [19] AI Investment and Outlook - **AI Commitment**: - Kuaishou plans to double its capital expenditures related to AI and expand team resources throughout the year [17] - The company is focused on enhancing model capabilities and expanding use cases rather than solely pursuing revenue growth [17] - **Kling AI Revenue**: - Expected to ramp up quickly, reaching a total of $154 million in 2025 [24] - Anticipated revenue growth driven by expanding paying users [28] Market Performance - **Share Price Movement**: - Share price has increased by 40% since the 1Q result in late May, reflecting higher AI expectations and overall valuation [3] - Current trading at a forward P/E of 12X, indicating attractive risk-reward potential [3] Competitive Landscape - **Core Business Growth**: - Kuaishou's core business is outpacing industry growth, with a projected 13% yoy growth in advertising for the second half of the year [17] - Domestic business expected to remain solid despite potential impacts from changes in Brazil's payment policy affecting overseas marketing [17] Risks and Considerations - **Key Risks**: - Slower-than-expected recovery in ad budgets - Weaker-than-expected monetization of Kling - Growth of user engagement base - Lower-than-expected profitability - Weaker-than-expected progress in AI [20] Valuation and Target Price - **Target Price**: - Revised target price for Kuaishou is set at HK$77, up from HK$68, based on a higher 13X 2026E P/E [19] - **Valuation Metrics**: - Projected revenue growth of 11.8% in 2024, with EBITDA growth of 44% [12] - Expected net income margin of 14% for FY25 [21] Conclusion - Kuaishou Technology is positioned well within the competitive landscape, with strong growth in its core business and significant investments in AI. The company’s revised financial targets and positive market performance suggest a favorable outlook for investors.

Summary of Kuaishou Technology Conference Call Company Overview - **Company**: Kuaishou Technology (1024.HK) - **Industry**: Generative AI and E-commerce Key Highlights 1. **Kling AI Upgrades**: Kuaishou showcased its latest Kling AI upgrades at the World Artificial Intelligence Conference (WAIC) in Shanghai, enhancing video generation capabilities with new features like automated audio integration and expanded use cases in advertising, marketing, animation, game publishing, eCommerce, and tourism [1][4] 2. **Revenue Projections**: Kling AI is projected to generate over US$140 million in revenue for 2025 and exceed US$200 million in annual recurring revenue (ARR) by the end of the year [1] 3. **Smart Canvas Feature**: The new 'smart canvas' feature allows for real-time collaboration among multiple users, improving the efficiency of content creation [4] 4. **Corporate Client Growth**: Kling AI has attracted over 45 million creators globally and serves more than 20,000 corporate users since the launch of Kling 2.0 [4] Advertising Policy Impact 1. **New Advertising Guidelines**: The State Administration for Market Regulation (SAMR) has introduced new advertising guidelines that classify traffic costs as advertising expenses, limiting pre-tax deductions to 15% of annual revenue for e-commerce businesses [1][5] 2. **Potential Effects on Kuaishou**: The new policy may impact merchants heavily reliant on traffic acquisition, potentially limiting their advertising budgets, especially in the livestreaming e-commerce sector [5] 3. **Monetization Rate**: Kuaishou has a lower-than-peer monetization rate of 3.5% (ads + commission as a percentage of GMV) but is expected to grow faster in the second half of the year, particularly in non-e-commerce ads [5][14] Financial Forecasts 1. **Revenue Growth**: Kuaishou's ad revenue is expected to grow significantly, with projections of RMB 126.9 billion in 2025, increasing to RMB 165.9 billion by 2027 [17] 2. **Earnings Per Share (EPS)**: Forecasted EPS is expected to rise from RMB 4.02 in 2025 to RMB 5.88 by 2027 [17] 3. **Valuation**: Kuaishou is rated as a "Buy" with a 12-month target price of HK$68, indicating a downside potential of 6.2% from the current price of HK$72.50 [15][17] Competitive Positioning 1. **Kling AI vs. Competitors**: The latest Kling 2.1 model has achieved cost reductions while maintaining performance, positioning it competitively against peers like ByteDance [13] 2. **Market Share**: Kuaishou is expected to remain one of the faster-growing advertising platforms, with a focus on increasing monetization from shelf-based e-commerce and improving ad load/conversion rates for non-e-commerce ads [14] Risks and Considerations 1. **Key Risks**: Potential risks include slower-than-expected recovery in ad budgets, weaker monetization, and slower growth in user engagement [15] 2. **Regulatory Environment**: The impact of new advertising regulations and their implementation will be closely monitored, particularly in Q4 [5] Conclusion Kuaishou Technology is positioned for growth in the generative AI space with its Kling AI platform, while navigating new advertising regulations that may impact its e-commerce operations. The company is expected to achieve significant revenue growth and maintain a competitive edge in the advertising market.

Summary of Kuaishou Technology Conference Call Company Overview - **Company**: Kuaishou Technology - **Ticker**: 1024.HK - **Market Cap**: USD 31.534 billion as of July 18, 2025 [19] Industry Context - **Industry**: Internet Software & Services - **Key Competitors**: ByteDance's Seedance, Google's Veo 3, and Kuaishou's Kling 2.1 [8] Key Insights Competitive Landscape - The video generation model market has low entry barriers and switching costs, leading to users experimenting with various models rather than committing to one [2] - Chinese models are offered at a 40-80% discount compared to Google's Veo 3 subscription [2] - Each model has unique strengths: - **Veo 3**: Advanced audio generation and cinematic video quality - **Kling AI**: Editing tools and style control through image input - **Seedance**: Strong prompt adherence and multi-shot capabilities [2] Financial Performance - **Kling AI** reached an annualized revenue run rate (ARR) of USD 100 million by March 2025, with monthly bookings exceeding RMB 100 million [3] - Revenue breakdown: 70% from prosumer subscriptions, 30% from corporate clients' API fees, with 70% of revenue coming from overseas [3] - Kuaishou's revenue and adjusted net profit are projected to grow 11% and 7% year-over-year to RMB 34 billion and RMB 5 billion, respectively [4][14] Valuation Metrics - Kuaishou's target price raised to HKD 82 from HKD 75, reflecting a lower weighted average cost of capital (WACC) [4] - Kling AI's revenue estimate increased to USD 120 million for 2025 [4] - Valuation comparison with vertical AI peers shows an average price-to-sales (P/S) ratio of 61x, suggesting Kling AI could be valued at USD 7 billion or HKD 13 per share [3][12] Growth Projections - Expected growth in various segments: - Advertising revenue: 12% year-over-year - E-commerce GMV: 14% year-over-year - Live-streaming revenue: 5% year-over-year [14] Risks and Challenges - Potential risks include regulatory changes affecting tipping and short-video content, increased content auditing costs, macroeconomic headwinds, and intensified competition in advertising and e-commerce [15] Financial Forecasts - Revenue projections for Kuaishou: - 2025: RMB 141.926 billion - 2026: RMB 155.624 billion - 2027: RMB 166.763 billion [16] - Net profit estimates: - 2025: RMB 17.313 billion - 2026: RMB 22.588 billion - 2027: RMB 27.911 billion [16] Conclusion - Kuaishou Technology is positioned for growth in the competitive landscape of video generation models, with strong revenue projections and a favorable valuation outlook. However, it faces regulatory and competitive risks that could impact its performance in the near term.

Core Viewpoint - Kuaishou is expected to report inline 2Q25 results with a projected 11% YoY revenue growth and 14.6% adjusted net profit margin, driven by accelerated monetization of Kling AI [1][3] Group 1: Financial Performance Expectations - Total revenue for 2Q25 is estimated to rise 11% YoY to RMB34.5 billion, aligning with consensus expectations [3] - Revenue contributions from streaming, online advertising, and eCommerce are projected to grow by 5% YoY, 12% YoY, and 22% YoY respectively [3] - Kling AI is forecasted to generate approximately RMB270 million in revenue for 2Q25, indicating continued acceleration in monetization efforts [3] Group 2: AI Strategy Execution - The company is effectively executing its AI strategies, particularly with Kling AI, focusing on version upgrades, internal ad and eCommerce integrations, and expansion into various industry verticals [2] - Kling AI is expected to contribute RMB1.2 billion in revenue (0.8% of total revenue) in 2025, driven by improved paying penetration among global users [2] - The company maintains stable forecasts for online advertising and eCommerce GMV despite raising Kling revenue estimates, indicating confidence in the core business [2] Group 3: Operational Adjustments - Total operating expenses assumptions for FY2025-27 have been raised by 1-2% due to committed investments in AI, leading to a 1% reduction in adjusted EPS estimates for FY2025-26 [2]

Investment Rating - The report suggests an "Overweight" rating for sectors benefiting from the influx of educated youth into the workforce, particularly in services, healthcare, financial services, high-tech industries, and hospitality & entertainment [66][69]. Core Insights - Youth unemployment in China has increased significantly, from approximately 10% in 2018 to around 21% in the summer of 2023, but this is viewed as an opportunity rather than a threat due to the unprecedented level of education among the youth entering the workforce [2][5][6]. - China is transitioning from an industrial policy-driven economy to a services-oriented economy, with a notable increase in the contribution of services to GDP, which has risen from 32% in 1990 to 55% in 2023 [4][53]. - The report highlights that the most educated cohort in China's history is entering the labor market, with tertiary education enrollment rates soaring from 3% in 1990 to 75% in 2023, indicating a well-prepared workforce [4][14][10]. Summary by Sections Youth Unemployment - Youth unemployment is currently misinterpreted as a threat, while it actually presents an opportunity for economic growth as the most educated population enters the workforce [6][13]. - The report emphasizes that the rise in youth unemployment should be viewed through the lens of potential service consumption growth [6][20]. Human Capital Development - China has rapidly upskilled its population, with 15,467 per 100,000 now holding a degree, a fourfold increase over the past 20 years [4][10]. - Investment in education has increased from 2.4% of GDP in 2005 to 4.0% in 2022, leading to a significant rise in STEM graduates [4][39]. Service Sector Growth - The services sector in China is expected to grow significantly, with the potential to reach levels comparable to the US, where services contribute 76% to GDP [53][55]. - Key sectors identified for growth include healthcare, financial services, high-tech industries, and hospitality & entertainment, which currently employ a lower percentage of the labor force compared to the US [62][66]. Investment Opportunities - The report lists specific companies that are well-positioned to benefit from the growth in service consumption, including Trip.com, MGM China, NetEase, and Ping An Group, among others [66][69][88]. - The financial intermediation sector is highlighted as having substantial growth potential, particularly in health and protection products, with a noted lack of active CPAs in China compared to the US [70][69]. Healthcare Sector - The healthcare sector is poised for growth, with China now holding a 20% share of global PCT patent publications in biotechnology, second only to the US [76][81]. - The report identifies companies like Innovent and Akeso as potential beneficiaries of the expanding healthcare services market [76][81].

Investment Rating - The report maintains a "Buy" rating on JD and Kuaishou, while also maintaining "Buy" on Meituan, Alibaba, and Pinduoduo, with a "Neutral" rating on VIPS [14]. Core Insights - The China eCommerce industry experienced approximately 10-11% gross GMV growth during the 2025 618 shopping festival, supported by a 15% year-over-year increase in parcel volume [1][2]. - The growth was driven by national subsidies on electronics and appliances, with competition normalizing across platforms [2]. - JD emerged as the fastest-growing shelf-based incumbent with an estimated GMV growth in the mid-teens percentage year-over-year, significantly increasing its transacting users by 100% [3][9]. - There is a notable shift towards on-demand eCommerce, with platforms like Meituan and JD focusing on instant retail rather than live-streaming eCommerce [10]. - Generative AI tools have proliferated, enhancing merchant efficiency and conversion rates during the festival [13]. Summary by Sections Broader Picture of the Festival - The overall GMV growth for the industry was estimated at 10-11%, with parcel volume growth at 15% year-over-year during the festival period [1][2]. - The narrowing gap between GMV and parcel volume growth indicates a lower return rate and fewer refunds without return orders [2]. eCommerce Platform Strategy During 618 Shopping Festival - Platforms focused on simplifying promotional activities and supporting merchants to lower operational costs [11][47]. - JD's innovative food delivery model and Meituan's significant order volume growth highlight the competitive landscape shift [10][11]. Engagement Data - The average daily active users (DAU) among top eCommerce platforms increased, with JD experiencing a historical high in DAU during the festival [50][53]. - Time spent on eCommerce apps increased by 10% year-over-year in May 2025, with JD and Pinduoduo showing significant growth [51]. Key Strategies and Merchant Support Measures - Various platforms implemented measures to support merchants, including commission rebates and reduced operational costs [11][47]. - Douyin introduced multiple merchant support policies, saving merchants a total of Rmb11 billion from January to May [11].

Investment Rating - The investment rating for Kuaishou Technology is Equal-weight [6] Core Insights - The competition in the AI video generation sector has intensified with the launch of ByteDance's Seedance 1.0 pro, which has achieved the top ranking in both text-to-video and image-to-video categories, outperforming competitors like Google's Veo 3.0 and Kuaishou's Kling 2.0 [2][3] - The pricing of Seedance 1.0 pro is competitive at Rmb3.67 for a 5-second video, which is 60-70% lower than similar market offerings, and it generates videos relatively quickly at approximately 40 seconds for a 5-second output [2][3] - The report suggests that while the recent releases from ByteDance and Minimax could significantly increase competition, it is premature to determine the long-term market leader in AI video generation [3] - Kuaishou's Kling model has shown strong financial performance year-to-date, which has positively influenced its share price, but there is a caution against overvaluing Kling before the competitive landscape stabilizes [3] Summary by Sections Industry Overview - The AI video generation market is experiencing heightened competition with new entrants and advancements in technology [1][3] Company Performance - Kuaishou Technology's Kling model is expected to exceed revenue guidance, reflecting strong market demand [4] - Financial projections for Kuaishou indicate a revenue increase from Rmb127 billion in 2024 to Rmb165 billion by 2027, with EBITDA growing from Rmb20 billion to Rmb37 billion in the same period [6] Valuation Metrics - The price target for Kuaishou Technology is set at HK$60.00, with a slight upside of 1% from the current price of HK$59.40 [6] - Key financial metrics include a projected P/E ratio of 11.2 for 2025 and an EV/EBITDA ratio of 7.1 for the same year [6]

Core Perspective - The "International Editors-in-Chief Roundtable" emphasized the importance of enhancing cross-cultural dialogue and practical cooperation between China and Latin America to create a more balanced and inclusive international media landscape [1]. Group 1: Economic and Cultural Exchanges - Malik Sullemana highlighted the necessity of deepening economic and cultural exchanges between China and Latin America, envisioning a partnership based on shared destiny [3]. - Camila Escalante pointed out that the current global media environment requires cooperation founded on mutual respect and trust, with China–Latin America collaboration serving as a constructive model [3]. Group 2: Civilizational Exchanges and Technological Collaboration - Belal Deeb noted that civilizational exchanges between China and Latin America have advanced progress in education and technology, providing pathways for multicultural coexistence [4]. - Angelica Maria Sánchez Reyes observed that civilizational dialogue and technological collaboration are creating impacts that extend beyond traditional trade models [4]. Group 3: Achievements in Cultural Understanding - Bai Long reported that China has established nearly 200 sister-city partnerships with 17 Latin American countries, with Confucius Institutes and cultural centers acting as bridges for mutual understanding [5]. - Under the Belt and Road Initiative, projects like the Port of Chancay symbolize deeper and higher-quality cooperation between the regions [5]. Group 4: New Channels of Communication - Liu Zhen emphasized that short videos have emerged as a new medium for connecting different cultures, fostering vibrant people-to-people exchanges through authentic and diverse content [6]. Group 5: Shared Goals and Multilateralism - Liu Hong concluded that both China and Latin American countries share rich civilizational experiences and similar modernization goals, stressing the importance of multilateralism and mutual learning in globalization [7].

Investment Rating - The report assigns a "Buy" rating to Kuaishou Technology with a 12-month price target of HK$63.00, indicating an upside potential of 15.6% from the current price of HK$54.50 [1][12]. Core Insights - Kuaishou's Kling AI has surpassed expectations with an Annualized Revenue Run Rate (ARR) exceeding US$100 million as of March 2025, and monthly subscription bookings exceeding RMB100 million (approximately US$14 million) in April and May [1][3]. - The launch of Kling 2.1 has significantly reduced costs, making it more competitive in the market, with per video costs dropping to US$0.27-0.47, which is 60-80% lower than the previous version [2][32]. - The revenue outlook for FY25 has been raised to US$100 million, with potential for further upside due to expanding use cases and increased promotional budgets [3][19]. Financial Projections - Revenue projections for Kuaishou Technology are as follows: - FY24: RMB 126.9 billion - FY25: RMB 140.7 billion - FY26: RMB 153.7 billion - FY27: RMB 165.8 billion [6][16]. - EBITDA is expected to grow from RMB 27.1 billion in FY24 to RMB 40.5 billion in FY27, indicating a strong growth trajectory [6][16]. - EPS is projected to increase from RMB 4.02 in FY25 to RMB 5.87 in FY27, reflecting a positive earnings outlook [6][16]. Market Position and Competitive Landscape - Kling AI has captured approximately 30% of the video generation AI model market, outpacing competitors like Runway and Google's Veo 2 as of May 2025 [20][23]. - The revenue mix for Kling AI indicates that 70% comes from 2C/2P subscription revenue, primarily from professional content creators, while 30% is derived from 2B API calling revenue [26][32]. - The company is focusing on expanding its user base, particularly in overseas markets, leveraging its technological advantages and improving user experience [23][32]. Valuation and Comparison - Kuaishou is currently trading at a forward P/E of 10X, which reflects its core video platform and advertising/eCommerce business, while Kling AI is expected to justify a premium valuation due to its growth potential [18][19]. - Comparatively, leading AI startups have ARR and valuations that suggest significant growth potential, with Kling AI's estimated ARR for FY25 at US$124 million [21][19].