3 December 2025 | 12:58AM HKT Equity Research Kuaishou Technology (1024.HK): Launching Kling O1, first unified multi-modal video model; what to look out for; Buy Kuaishou Kling AI has announced the launch of its first unified multimodal video model, Kling Video O1 model on Dec 1. Over the course of this week, Kling will also release more model upgrades (O1 image editing model launched on Dec 2 etc.). The O1 model is an integrated version that combines video editing, multiple images reference with better und ...

Kuaishou Technology (1024.HK) Conference Call Summary Company Overview - **Company**: Kuaishou Technology - **Ticker**: 1024.HK - **Market Cap**: HK$292.7 billion / $37.6 billion - **Current Price**: HK$68.65 - **12-Month Target Price**: HK$83.00, indicating an upside of 20.9% [2][22] Key Industry Insights - **AI Integration**: Kuaishou is leveraging AI to enhance user experience and advertising monetization, with a focus on the Kling AI platform [1][5] - **User Ecosystem**: The user base is divided into professional (P-end) and business (B-end) users, with a notable shift in user mix from 70:30 to 60:40 in favor of B-end users [7][8] Core Business Highlights - **User Growth**: - Approximately 200 million professional users globally, with a low single-digit percentage of paying users out of 20-30 million monthly active users (MAU) [7] - Average Revenue Per User (ARPU) is currently between $20-$30 per month, with expectations for stability in the short term [7] - **Advertising and E-commerce**: - Advertising revenue growth of 4-5% in Q3 2025 attributed to AI technology [12] - E-commerce now accounts for approximately 30% of total Gross Merchandise Value (GMV), with a target to increase this to over 40% [11] - The aggregate take rate is around 4%, with 1% from e-commerce commissions and 3% from e-commerce ads [11] Financial Projections - **Kling AI Revenue**: Expected to reach $343 million by 2027, with a forecast of $45 million+ in Q4 2025 [14][16] - **Revenue Growth**: - Revenue projections for Kuaishou are as follows: - 2025E: RMB 142.0 billion - 2026E: RMB 157.0 billion - 2027E: RMB 172.4 billion [19][22] Risks and Challenges - **Key Risks**: - Slower-than-expected recovery in advertising budgets - Weaker monetization of the Kling platform - Slower growth in user engagement metrics - Lower-than-expected profitability and AI progress [20] Additional Insights - **User Engagement**: Kuaishou is focusing on attracting younger users through diverse content categories to drive daily active users (DAU) and traffic [12] - **Advertising Strategy**: The current ad load is approximately 9%, with plans to increase this to over 9% through improved native advertising and algorithm enhancements [12] - **Financial Health**: The company is maintaining a strong gross margin, projected to reach 57.3% by 2027 [19] This summary encapsulates the key points from the conference call, highlighting Kuaishou's strategic focus on AI, user growth, and financial projections while also addressing potential risks that could impact its performance.

Summary of J.P. Morgan's Global Markets Strategy Conference Call Industry Overview - **Focus**: Asian equity markets, particularly China, Korea, and India - **Outlook for 2026**: Bullish on Asian equities with expectations of moderate to exceptional gains driven by policy support and liquidity [2][41][42] Key Points 1. Market Valuations and Positioning - Equity market valuations are currently high, with positioning in regional equities above the 80th percentile since July [2][41] - Despite high valuations, the expectation is for Asian equities to deliver gains due to supportive policies and liquidity [2][41] 2. China Market Recovery - China is in the early stages of recovery from a ~4-year downcycle, with acceptable valuations and light positioning [5][42][88] - Multiple support factors for China include: - AI adoption and power generation advantages - Innovations in robotics, biotech, semiconductors, and fintech - Consumption and property support measures - Rising shareholder returns and domestic liquidity reallocation [5][42][88][89] 3. AI Sector Insights - AI-heavy stocks (~35% of MXASJ) present a mixed risk-reward scenario, with concerns about monetization and potential commoditization [5][41] - The balance of risk and reward suggests limited incentive to increase exposure to AI stocks at this time [5][41] 4. Sector and Country Allocations - **Overweight (OW)**: Korea, Hong Kong/China, India, Consumer Staples, Materials, Financials [5][41][46] - **Neutral**: Taiwan, Technology, Industrials, Real Estate [5][41][46] - **Underweight (UW)**: ASEAN, Utilities, Energy, Healthcare [5][41][46] 5. Earnings Growth and Sector Contributions - Approximately 70% of the EPS consensus growth forecast for 2026 is driven by sectors in Korea, Taiwan, China, and India [14] - A synchronized acceleration of year-on-year growth across markets is anticipated for the first time since 2021 [14] 6. Policy Environment - Global easing policies are expected to support earnings and inflate equity valuations beyond normal levels [57][60] - The US has shifted from austerity to expansionary fiscal policies, which is expected to have a positive impact on Asian markets [58][68] 7. Long-term Themes - Key long-term themes expected to gain traction in 2026 include: - Governance improvements driving re-rating - Localization of Asian equity markets - Stablecoins as a new financial frontier [5][46] 8. Market Index Targets - End-2026 index targets for MXASJ are set at 1025 (base case), 1200 (bull case), and 800 (bear case) [7][54] 9. Risk Considerations - The potential for large gains in 2026 is viewed as substantially higher than the risk of large losses, particularly in the context of China's recovery [5][42][88] Additional Insights - The report emphasizes the importance of monitoring governance reforms in Korea and the ongoing developments in China as critical factors influencing market performance [5][41][42] - The strategic case for allocation to Asia is strengthened by recent improvements in long-term headwinds such as margins and valuations [14][41] This summary encapsulates the key insights and recommendations from J.P. Morgan's conference call, focusing on the outlook for Asian equity markets and the specific dynamics affecting China, Korea, and India.

Summary of Conference Call on Kuaishou and the Video Generative AI Sector Industry Overview - **Industry**: China Internet Sector, specifically focusing on Video Generative AI - **Key Players**: Kuaishou, Bytedance, Google, OpenAI Core Insights 1. **Kuaishou's Leadership in Video Generative AI** Kuaishou's Kling platform is recognized for its superior performance in video generative AI, outperforming competitors like Sora 2, Veo3, and Seedance. The platform excels in prompt learning, video duration, and detail control, supported by Kuaishou's commitment to resource allocation in this area [2][2][2] 2. **Technical Advantages of Kling** Kling utilizes a hybrid architecture that allows 80% of generation workloads to be processed on-device, significantly reducing costs and latency. Its deep-learning engine is optimized for mid- and low-end hardware, expanding its user base [2][2][2] 3. **Market Positioning** Kling targets professional consumers (to-C), while Bytedance's Seedance focuses on business monetization (to-B) through subscription and private deployment models. This distinction highlights Kuaishou's strategic positioning in the market [2][2][2] 4. **Unit Economics Challenges** Current unit economics for video generative AI operators are low or negative due to high R&D and training costs. Operators are prioritizing market share over profitability, with expectations of declining model pricing in the near future [3][3][3] 5. **Application Scenarios** Video generative AI is primarily applied in advertising and e-commerce, enhancing productivity by over 60% through AIGC-assisted workflows. Digital humans in e-commerce can reduce labor costs and provide personalized content around the clock [4][4][4] Investment Outlook 1. **Positive Outlook for Kuaishou** Kuaishou is viewed as a top pick in the video generative AI space due to its reasonable valuation and growth potential, with projected EPS CAGR of 20% from 2024 to 2026 [5][5][5] 2. **Valuation Metrics** The company is currently trading at a PE ratio of 13x for 2025 and 11x for 2026, with a potential upside in valuation as video generative AI progresses [5][5][5] 3. **Investor Positioning** There is still relatively low investor positioning in Kuaishou, indicating potential for growth as the market recognizes its value [5][5][5] Risks and Considerations 1. **Competitive Landscape** Key risks include intensifying competition, fast-evolving technology trends, and uncertain monetization strategies within the internet sector [7][7][7] 2. **Regulatory Environment** Kuaishou faces risks from tightening regulations in online videos, livestreaming, and gaming, which could impact user growth and monetization [8][8][8] 3. **Economic Factors** A slowing Chinese economy may lead to reduced growth in online advertising revenues, posing a risk to Kuaishou's financial performance [8][8][8]

Summary of Douyin Ecommerce Expert Call Industry Overview - **Industry**: Ecommerce in China, specifically focusing on Douyin (unlisted) and its performance during the Double 11 shopping festival Key Points 1. **Growth Performance**: Douyin's gross merchandise value (GMV) during the Double 11 period grew by 25% year-on-year, which is noted as the fastest growth in the industry, although it has slowed from over 30% growth in the previous three quarters [2][3] 2. **Year-End Expectations**: Douyin is expected to conclude the year with a GMV of CNY4.4 trillion, representing a 29% year-on-year increase, surpassing the initial target of CNY4.2 trillion set for 2025 [2] 3. **Factors Contributing to Growth**: The expert attributed Douyin's growth to: - A less tough base effect compared to competitors JD and Alibaba - Increased subsidies - Strong momentum in its marketplace ecommerce [3] 4. **Subsidy Program Expansion**: Douyin's trade-in subsidy program (TSP) expanded from 8 provinces last year to approximately 22 provinces this year, contributing to its growth despite starting slower than JD and Alibaba [4] 5. **Subsidy Spending**: Douyin spent CNY5 billion in subsidies during this year's Double 11, which is a 27% increase year-on-year [5] 6. **Marketplace Model Success**: Douyin's marketplace model saw GMV growth of approximately 50% year-on-year, accounting for 45% of total GMV from January to October, while live-streaming ecommerce GMV grew by 14-18% year-on-year [6] 7. **Challenges in Marketplace**: Despite strong growth, Douyin faces challenges with lower shopper mind share compared to established competitors like Alibaba, JD, and Pinduoduo, with nearly half of its marketplace GMV relying on user traffic from live-streaming ecommerce [6] 8. **Grocery Category Performance**: The grocery category performed well, benefiting from the shift of consumption from offline to online channels, driven by competition in quick commerce between Alibaba and Meituan [7] Additional Insights - **Competitive Landscape**: There was a notable competition between Douyin and Alibaba towards the end of the Double 11 period, as both platforms sought to capture growth in a sluggish consumer market [5] - **Market Dynamics**: The overall ecommerce industry is experiencing a significant migration of grocery shopping from offline to online, influenced by competitive pressures [7]

Kuaishou Technology 3Q25 Earnings Call Summary Company Overview - **Company**: Kuaishou Technology (1024.HK) - **Industry**: China Internet and Other Services - **Market Cap**: Rmb252,753 million - **Current Stock Price**: HK$63.50 - **Price Target**: HK$76.00 (20% upside) Key Financial Results - **3Q25 Results**: In line with estimates - Total Revenue: Rmb35,554 million, a 14% YoY increase - Online Marketing Services Revenue: Rmb20,102 million, a 14% YoY increase - Other Services Revenue: Rmb5,878 million, a 41% YoY increase - Gross Profit: Rmb19,434 million, a 15% YoY increase - Net Income: Rmb4,986 million, a 26% YoY increase - Diluted EPS: Rmb1.02, a 37% YoY increase [3][10][11] 4Q25 Outlook - **Revenue Guidance**: Slightly below market expectations - Domestic online marketing growth expected to slow to 14% - GMV growth projected to fall to 12.5-13% - Other revenue growth expected to slow from 41% in 3Q to 22-23% in 4Q due to commission rebates to e-commerce partners [2][3] 2026 Projections - **Revenue Estimates**: - 2026 Revenue: Rmb158 billion - 2027 Revenue: Rmb171 billion - **EPS Estimates**: - 2026 EPS: Rmb5.18 - 2027 EPS: Rmb5.76 [7] Strategic Insights - **Cost Control**: Management emphasizes cost control as a key factor for maintaining profitability in 4Q [4] - **Kling Product Performance**: Kling's revenue reached Rmb300 million, driven by B2B expansion, with a 40% contribution from B2B sales in 3Q25 [9][10] - **Advertising Growth**: External ads growth is expected to slow, but Internet content (short dramas, novels, and games) remains a growth driver [9] Risks and Considerations - **Upside Risks**: - Better-than-expected MAU growth - Improving ad revenue per DAU - Lower-than-expected sales and marketing expenses [16] - **Downside Risks**: - Lower-than-expected advertising revenue growth - Increased competition affecting MAU growth [16] Valuation Methodology - **Valuation Model**: Discounted cash flow model with a 12% WACC and 2% perpetual growth rate - **Kling Valuation**: Valued at 25x EV/S, aligning with top software companies globally [14] Conclusion Kuaishou Technology's 3Q25 results reflect solid growth, although the outlook for 4Q25 and 2026 shows signs of slowing growth. Cost control measures and strategic product developments, particularly with Kling, are critical for maintaining profitability and navigating competitive pressures in the market.

Kuaishou Technology (1024.HK) Earnings Review Summary Company Overview - **Company**: Kuaishou Technology - **Ticker**: 1024.HK - **Market Cap**: HK$270.8 billion / $34.8 billion - **Industry**: China Games, Entertainment & Healthcare Tech Key Financial Highlights - **3Q25 Performance**: Kuaishou reported a profit beat in 3Q, driven by disciplined cost efficiency - **4Q25 Guidance**: Guidance is largely in-line with expectations on ads/GMV growth, with profit outlook raised due to effective S&M spending control [1][12] - **Revenue Estimates**: - 2025E Revenue: RMB 142,035.2 million (previously RMB 142,787.2 million) - 2026E Revenue: RMB 157,020.2 million (previously RMB 157,593.0 million) [6][20] - **EPS Estimates**: - 2025E EPS: RMB 4.79 (previously RMB 4.67) - 2026E EPS: RMB 5.40 (unchanged) [6][20] Core Insights 1. **Advertising Growth**: - 3Q ads grew by 14%, with domestic ads up 16% YoY, outpacing the industry - AI LLMs/OneRec technology contributed an additional 4-5% YoY growth in ads this quarter [12][19] - Expected ads growth of 12-13% YoY into 4Q and low-teens% for 2026 [12][19] 2. **Investment and Margin Expansion**: - Kuaishou plans to increase capex for FY25 to RMB 14 billion from RMB 12 billion - Adjusted operating profit expected to rise 28% YoY in 2025E, driven by disciplined S&M cost control and operational efficiency [12][19] 3. **Kling Revenue Outlook**: - FY25 revenue guidance for Kling raised to US$140 million (from US$125 million) - Anticipated flat/slightly up QoQ revenue for 4Q25, with potential for upward revision [19][20] 4. **AI Strategy**: - Kuaishou is focused on investing in multi-modal training and expanding Kling's use cases - Video generation is in early stages, with a rapidly expanding total addressable market (TAM) [19][20] Risks and Considerations - **Key Downside Risks**: 1. Slower-than-expected ad budget recovery 2. Weaker-than-expected Kling monetization 3. Slower growth in user engagement 4. Lower-than-expected profitability 5. Weaker-than-expected AI progress [21] Valuation and Target Price - **12-Month Target Price**: Unchanged at HK$83, based on a 14X 2026E P/E [1][20] - **Current Price**: HK$63.50, indicating a potential upside of 30.7% [1] Conclusion Kuaishou Technology is positioned to leverage AI advancements while maintaining a balance between investment and profitability. The company’s strategic focus on advertising growth and operational efficiency, alongside a robust outlook for its Kling segment, supports a positive investment thesis.

Performance Overview - Baron International Growth Fund gained 6.04% in Q3 2025, underperforming its benchmark MSCI ACWI ex USA Index which appreciated 6.89% [3] - Year-to-date performance shows the Fund at 24.85%, slightly below the benchmark's 26.02% [4] - The Fund's performance remains ahead of the Proxy Benchmark on a year-to-date and one-year trailing basis [3] Market Drivers - The initiation of a Federal Reserve easing cycle and enthusiasm for AI-related investments were key drivers of global equity returns during the quarter [7][32] - Ongoing uncertainty regarding U.S. tariffs may clarify in the current quarter, but a global central bank easing cycle is evident [7][32] - The shift in U.S. trade and immigration policy, along with accommodative monetary policy, is expected to impact global inflation dynamics [7][32] Sector Performance - Poor stock selection in the Information Technology sector, particularly due to Constellation Software Inc.'s share price correction, was a significant detractor [8] - Favorable stock selection in the Materials sector, driven by positions in global security and sustainability themes, contributed positively [8] - Weak stock selection in Consumer Staples and Communication Services also negatively impacted performance [8] Geographic Performance - Underperformance was noted in Poland, Japan, and Israel, while favorable stock selection in Australia and China partially offset these losses [9] - The Fund remains optimistic about China's AI potential and structural growth story in India, despite recent underperformance [9] Top Contributors and Detractors - Top contributors included Lynas Rare Earths Limited, argenx SE, and Lundin Mining Corporation, with Lynas benefiting from geopolitical tensions [10][11][13] - Key detractors were Constellation Software Inc., InPost S.A., and ODDITY Tech Ltd., with Constellation facing uncertainty around AI impacts and leadership changes [14][15][16] Recent Investment Activity - New investments included Nomura Holdings, EssilorLuxottica SA, Pony AI Inc., and GDS Holdings Limited, reflecting a focus on high-conviction ideas [24][25][26][27] - Increased exposure to existing positions such as Lundin Mining Corporation and Japan Exchange Group, while exiting positions in less favored stocks [29] Outlook - Strong performance is expected from global markets, particularly in Europe, driven by increased defense and infrastructure spending [30][31] - The Fund anticipates continued growth in China and Korea, with many holdings poised for significant earnings improvements [31] - The competitive landscape in AI is evolving, with China emerging as a formidable player alongside U.S. technology giants [34][35][36]

Summary of Key Points from the Conference Call Industry or Company Involved - The discussion primarily revolves around the **China Equity Strategy** and the implications of recent **US-China trade talks** on various sectors and companies within the Chinese market. Core Insights and Arguments 1. **Trade Talk Outcomes**: Recent trade talks yielded better-than-expected results, particularly concerning the reduction of fentanyl-related tariffs from 20% to 10% and the rollback of the 100% tariff hike against China announced in early October 2025 [5][2][3]. 2. **Market Recovery Potential**: Despite some major indices not fully recovering, particularly HSTECH which remains 6% below its October 9 level, there is potential for market catch-up and optimism if state visits by leaders occur in the coming quarters [2][3]. 3. **Sector Benefits**: Sectors likely to benefit from improved US-China relations include **hardware tech**, **healthcare**, and **internet**. Specific stocks with significant potential for recovery have been identified based on their performance since the tariff announcements [2][4]. 4. **Profit-Taking Concerns**: There has been some profit-taking in new consumption and biotech names, averaging a decline of approximately 8% over the last four weeks. However, historical data suggests that MSCI China typically delivers an average return of 8% in the fourth quarter following positive returns in the preceding three quarters [3][14]. 5. **TMT Sector Performance**: The Technology, Media, and Telecommunications (TMT) sector is expected to continue strong performance due to attractive valuations, strong earnings momentum (hardware tech earnings up approximately 50% in Q2 2025), and robust guidance on AI-related spending from US hyperscalers [3][14]. 6. **Rebound Positioning**: Sectors that rebounded the most after the April trough and have underperformed since the tariff news are likely to see significant recovery potential. These include **data centers**, **sportswear**, **online gaming**, **consumer finance**, **pharma retail**, and **tech hardware** [4][3]. 7. **Earnings Risks**: Sectors with the highest potential earnings risks from tariffs include **machinery**, **pet products**, **sportswear OEM**, **biotech**, and **tech hardware** [4]. Other Important but Possibly Overlooked Content 1. **Historical Performance Data**: The report highlights that since 2000, MSCI China has had positive returns in over 60% of instances when the first three quarters recorded positive returns [14]. 2. **Government Policy Support**: Continued government support for technological innovation is indicated in the 15th five-year plan, which may further bolster the TMT sector [3]. 3. **Individual Stock Performance**: A list of buy-rated stocks that have declined significantly since October 9, 2025, includes companies across various sectors, indicating potential investment opportunities [13][37]. 4. **Market Risks**: Risks facing China's equities include a potential hard landing in the property market, capital exodus due to currency depreciation, and slow structural reform progress. Inadequate government policies could lead to market shocks [25]. This summary encapsulates the key points discussed in the conference call, providing insights into the current state and future outlook of the Chinese equity market in light of recent trade developments.

Summary of Earnings Preview for 3Q25 Industry Overview - The report focuses on the **China Internet and Other Services** sector, particularly the **online entertainment** and **OTA (Online Travel Agency)** segments, indicating an overall solid set of results expected for 3Q25 amid trade tensions [1][2]. Key Companies and Forecasts NetEase (OW) - Forecasted **15% growth** in game revenue and **26% growth** in Non-GAAP profit [3]. - Strong performance of FWJ's free-to-play version noted, though difficult to quantify due to its PC game nature [3]. - Limited upward revision in 2025 revenue consensus post-2Q earnings suggests potential upside risk [3]. Tencent Music Entertainment Group (TME) (OW) - 3Q forecast aligns with guidance, with upside risk for other music revenue due to concert seasonality [4]. - Key focus for 3Q25 earnings will be 2026 profit guidance, with a consensus of **Rmb11.2 billion** [4]. - Absolute profit is prioritized over margin due to uncertainty in concert contributions [4]. Trip.com Group Ltd (TCOM) (OW) - Bottom-line forecast is at the higher end of guidance range, with expected minimal YoY OPM contraction (~1ppt) in 3Q [5]. - Slight OPM expansion anticipated in 4Q from a low base, critical for evaluating 2026 consensus forecast [5]. - Competition from Fliggy highlighted as a key focus [5]. Tongcheng Travel Holdings (OW) - Expected **13% core OTA revenue growth** and **14% profit growth** [6]. - Management's comments on synergy from the Wanda Hotel Management acquisition are anticipated at the full-year result rather than in 3Q [6]. Kuaishou (EW) - 3Q guidance is in line, with expectations to raise full-year profit guidance by **3-5%** [7]. - Kling's performance remains a market debate, with increasing competition noted [7]. - Traffic and monetization changes under the new OneRec AI recommendation model are deemed crucial [7]. Bilibili (EW) - Forecasting **20% growth** in ads and a **16% decline** in game revenue [8]. - Expected **8% non-GAAP net margin** (Rmb613 million profit), with upside risk due to a relatively low base [8]. Important Focus Areas for 3Q Earnings - **NetEase**: Revenue and grossing to gauge FWJ's new run rate [12]. - **TCOM**: 4Q margin guidance as a checkpoint for potential normalization of overseas marketing intensity [12]. - **TME**: Detailed 2026 outlook expected due to good visibility [12]. - **Kuaishou**: Traffic and monetization growth to evaluate the new AI recommendation system [12]. Financial Highlights - **Kuaishou**: Expected total revenue of **Rmb35.391 billion**, with a **14% YoY growth** [16]. - **TCOM**: Anticipated net revenue of **Rmb18.193 billion**, reflecting a **15% YoY growth** [20]. - **TME**: Projected total revenue of **Rmb8.230 billion**, with a **17% YoY growth** [18]. Conclusion The earnings preview indicates a generally positive outlook for the online entertainment and OTA sectors in China, with several companies expected to outperform amid competitive pressures and market dynamics. Key financial metrics and growth forecasts suggest potential investment opportunities, particularly in companies like NetEase, TME, and TCOM.