12 February 2026 | 9:30PM HKT Equity Research Kuaishou Technology (1024.HK) Key debates on Kling vs. Seedance, tax overhang and 2026 growth; Buy 1024.HK 12m Price Target: HK$87.00 Price: HK$69.55 Upside: 25.1% We dissect the key investor debates on Kuaishou that have come up in our conversations over the past 2 months around its Kling AI's potential and competition vs. peers (Seedance 2.0 etc.), various tax related issues and a potential tax overhang in 2026 ("traffic acquisition tax", "eCommerce related ta ...

Earnings and forecasts change: Considering above factors and our latest estimates of Kling, we cut our FY2026- 27E total forecasts by 2% due to 2-3% of streaming and ad cut, partially offsetting by increasing revenue contribution from Kling AI. Our 6-7% adj EPS cut reflects our increasing AI-related expenses but we deem it will be manageable to maintain Kling leading position. 机构：中银国际 研究员：Raphael CHEN/Dolores Tang We model an inline 4Q25 with +10% YoY topline and RMB5.4bn adj. net profit. Despite N-T pressu ...

An abrupt selloff in Chinese technology shares pushed a key index to the brink of a bear market, amid growing concerns that authorities may impose a tax on Internet firms. The Hang Seng Tech Index reversed an earlier gain to fall as much as 3.4% on Tuesday, briefly extending its drop to 20% from an October peak. Losses narrowed at the close, with the gauge ending down 1.1%. Kuaishou Technology, Baidu Inc. and Tencent Holdings Ltd. were among the biggest decliners. Most Read from Bloomberg The sudden dr ...

Summary of Key Points from the Conference Call Industry Overview - The focus is on China's online entertainment, data centers, and software sectors, with potential catalysts identified that could impact share prices in the near future [1][2]. Company-Specific Insights Beijing Kingsoft Office Software Inc (688111.SS) - **2025 Profit Alert**: Forecasted revenue growth of 16.5% and normalized profit growth of 11% for 2025 [7] - **Sustainability Concerns**: Expected revenue/profit beat driven by Xinchuang, but sustainability is questioned due to a one-off business model and reliance on government budgets [7] Bilibili Inc (BILI.O) - **CNY B2C AI App Marketing Campaign**: Major B2C AI apps expected to launch aggressive marketing during the CNY holiday, with Bilibili positioned to benefit due to its neutral ad platform and younger user base [7] - **New Game Launch**: Targeting another round of testing for "Three Kingdoms: N Card" after CNY, with user feedback deemed critical [7] GDS Holdings Ltd (GDS.O) - **GPU Import Regulation Update**: Anticipated Chinese government approval with conditions, which could also affect data center peers like VNET [7] - **New Booking Guidance**: Forecasting 500MW new booking target in the domestic market for 2026, up from 300MW in 2025, indicating a strong outlook [7] Kuaishou Technology (1024.HK) - **2026 Guidance**: Analysts are more bearish than consensus on Kuaishou's 2026 profit growth due to higher depreciation and normalization of income tax rates [8]. Meitu Inc (1357.HK) - **2026 Adjusted Net Profit Guidance**: Estimated adjusted net profit for 2026 is Rmb12.6 billion, with guidance expected to align with this estimate [8]. NetEase, Inc (NTES.O) - **Game Launch Timeline**: Anticipated release of "Sea of Remnants" before summer 2026, with expected annualized grossing of Rmb5 billion [8]. Tencent Music Entertainment Group (TME.N) - **Ximalaya Acquisition**: Expected Rmb1.7 billion profit contribution from Ximalaya post-acquisition, with low user base duplication anticipated [9]. - **KPOP Concert Regulations**: Loosening of restrictions on KPOP stars hosting concerts in mainland China could provide a boost [9]. Trip.com Group Ltd (TCOM.O) - **Antitrust Investigation Update**: One-off fines expected to have minimal impact, but changes in business model or commission rates could harm long-term profitability [9]. Additional Insights - The 2026 CNY holiday is projected to be nine days long, a record length, which could positively influence travel demand and consumption growth [9]. - The overall performance of the Greater China IT Services and Software industry is viewed as "In-Line" with market expectations [3]. Important Considerations - Investors should be aware of potential conflicts of interest as Morgan Stanley conducts business with companies covered in the research [4]. - The report emphasizes the importance of considering multiple factors in investment decisions, rather than relying solely on this research [4]. This summary encapsulates the key points and insights from the conference call, highlighting the potential catalysts and challenges within the specified sectors and companies.

Core Insights - Kuaishou Technology's AI video-generation tool has surpassed 12 million monthly active users, indicating strong user engagement and adoption in the market [1] Company Summary - The growth of Kuaishou's AI video-generation tool reflects a broader trend among Chinese tech companies investing in artificial intelligence [1]

Core Insights - China's top antitrust body has initiated a probe into competition practices in the food delivery sector, leading to a rise in shares of major companies like Meituan, Alibaba, and JD.com [1][4] Group 1: Market Reactions - Meituan's stock increased by 6.6%, marking its largest gain since May 29, while Alibaba's shares rose by 5.3% and JD.com's shares gained over 2% [1] - The overall sentiment in the Chinese tech sector was positive, with the Hang Seng Tech Index climbing by 3.1% [6] Group 2: Regulatory Actions - The State Council's anti-monopoly committee will investigate competition behaviors among delivery platforms through on-site checks, interviews, and surveys, as per the State Administration for Market Regulation [3] - Increased scrutiny is expected to support industry margins by curbing subsidy-led expansion and raising compliance costs for new entrants [2] Group 3: Industry Context - Since 2025, Beijing has intensified scrutiny of the retail sector due to significant investments in subsidies by major players like Alibaba, Meituan, and JD.com, which led to aggressive price wars [4] - Investors are optimistic that the ongoing probe will help mitigate the rampant discounting and subsidies that have negatively impacted profit margins for these companies [4]

Group 1: Tariffs and Legal Developments - The Supreme Court is expected to rule on the legality of tariffs imposed by President Trump under the International Emergency Economic Powers Act (IEEPA) [3][4] - If deemed unlawful, the U.S. government may need to refund over $133.5 billion in duties to importers [6] Group 2: Alibaba and Nvidia - Alibaba's shares rose by 3.1% following reports that China may approve the import of Nvidia's H200 AI chips [6][7] - Alibaba is reportedly inquiring about purchasing over 200,000 units of the H200 chips to enhance its large language models and compete with U.S. firms [8] Group 3: Disney's Investment in China - Disney CEO Bob Iger announced plans to continue expanding investments in China, expressing confidence in the country's development [9] - Iger's visit may suggest potential plans for opening another theme park in China, as Disney currently operates Shanghai Disneyland [10]

Kuaishou Technology (1024.HK) Conference Call Summary Company Overview - **Company**: Kuaishou Technology - **Ticker**: 1024.HK - **Industry**: AI Video Generation Key Points Industry Dynamics - The AI video generation industry is in its early stages, with a Total Addressable Market (TAM) projected to grow from **US$1 billion in 2025** to **US$39 billion by 2033**, representing a **56% CAGR** [6][15] - The Professional (2P) segment of the TAM is expected to expand from **US$700 million in 2025** to **US$17 billion by 2033**, with a **49% CAGR** [6][15] - The Business (2B) segment is anticipated to grow from **US$400 million in 2025** to **US$22 billion by 2033**, outpacing the Professional segment with a **66% CAGR** [6][15] Company Performance - Kuaishou's share price increased by **11%** on January 5, 2026, attributed to the strong performance of the Kling AI model and positive sentiment towards AI applications [1] - Revenue forecasts for Kuaishou are now **US$140 million+ for 2025** and **US$230-240 million for 2026**, with potential upside due to the popularity of the Kling AI 2.6 Motion Control feature [7][16] - The current share price implies a **10X PE** for Kuaishou's main platform and **25X P/S** for Kling, suggesting a valuation of **US$5-6 billion** [7][21] User Adoption and Growth - Kling AI has seen a significant increase in user engagement, with daily grossing rising **113%** from December 27, 2025, to January 3, 2026, and weekly grossing increasing **64%** [2] - The Motion Control feature of Kling AI has gone viral, particularly in markets like Korea and the US, contributing to its rapid growth [2][5] Competitive Positioning - Positive user feedback highlights Kling AI's realistic motion and lifelike facial expressions, positioning it favorably against competitors like Runway [5] - Despite a **60%+ increase in pricing** for the new models compared to previous versions, Kling AI remains competitive against overseas peers [5][20] Future Outlook - Upcoming releases of new functions and versions of video models are expected to enhance production efficiency and broaden use cases [8] - Enterprise clients now account for **40% of Kling's revenue**, indicating a growing demand for professional video usage [8] Risks and Considerations - Key downside risks include slower-than-expected recovery in advertising budgets, weaker monetization of Kling, and lower profitability [24] - The company maintains a **Buy** rating with a 12-month price target of **HK$83**, indicating a potential upside of **12.8%** from the current price [26] Conclusion Kuaishou Technology is positioned to capitalize on the expanding AI video generation market, with strong user adoption and innovative features driving growth. The company faces risks but maintains a favorable outlook supported by robust revenue forecasts and competitive positioning.

Summary of Key Points from the Conference Call Industry Overview - The conference call focuses on the **China On-line Entertainment, Software, and Data Center** sectors, highlighting potential catalysts that could impact share prices in the near future [1][6]. Company-Specific Insights Bilibili Inc (BILI.O) - **Catalyst**: New game launch - Three Kingdoms: N Card - **Expected Launch**: Mid- to late March 2026 - **Monetization**: Anticipated slow monetization initially, focusing on Daily Active Users (DAU) with a base case of 10-20 million DAU [7][7]. GDS Holdings Ltd (GDS.O) - **Catalyst**: High-end GPU import regulation update - **Importance**: Very High, with a meaningful upside surprise expected - **Market Expectation**: Anticipation of Chinese government approval for NV H200 GPU imports, likely with conditions [7][7]. Kingdee International Software Group (0268.HK) - **Catalyst**: Full-year 2025 profit alert - **Expectation**: Profit forecast of Rmb280 million in 2025, marking a turnaround after five years of losses [7][7]. Kuaishou Technology (1024.HK) - **Catalyst**: Kling model iteration and full-year 2026 guidance - **Outlook**: More bearish than consensus on 2026 profit growth due to increased depreciation and normalization of income tax rates [8][8]. Meitu Inc (1357.HK) - **Catalyst**: Full-year 2026 guidance and strategic partnership updates with Alibaba - **Profit Guidance**: Estimated adjusted net profit of Rmb12.6 billion for 2026, expected to align with estimates [8][8]. Tencent Music Entertainment Group (TME.N) - **Catalyst**: Regulatory approval of the Ximalaya acquisition - **Profit Contribution**: Expected Rmb1.7 billion annualized profit contribution post-cost synergy [8][8]. Trip.com Group Ltd (TCOM.O) - **Catalyst**: Full-year 2026 guidance - **Key Focus**: Operating margin guidance, with expectations of flat YoY margins due to aggressive overseas investments [8][8]. Tuya Inc. (TUYA.N) - **Catalyst**: 2026 Consumer Electronics Show - **Market Reaction**: Positive share price reaction anticipated if breakthroughs in AI applications are showcased [8][8]. Regulatory and Market Dynamics - The Chinese government is expected to loosen restrictions on KPOP stars hosting concerts in mainland China, which could be discussed during the upcoming Korean President's visit in early January 2026 [10][10]. Additional Insights - The conference highlighted the importance of monitoring the **Chinese hyperscalers' data center tenders** and their GPU sourcing strategies, which could significantly impact the data center market [7][7]. Conclusion - The conference call provided a comprehensive overview of upcoming catalysts in the China On-line Entertainment, Software, and Data Center sectors, with specific focus on company performance expectations and regulatory changes that could influence market dynamics in 2026.

Economic Indicators - The U.S. Commerce Department is set to release the initial estimate of third-quarter GDP, which was delayed by two months due to a government shutdown. Economists forecast a GDP growth of +3.3% quarter-over-quarter, driven by strong consumer spending and modest investment gains [1] - U.S. Durable Goods Orders for October are expected to decline by -1.5% month-over-month, while Core Durable Goods Orders are anticipated to rise by +0.3% month-over-month [5] - The Fed's Industrial Production reports for October and November are expected to show no change in October and a +0.1% increase in November [6] - The U.S. Richmond Fed Manufacturing Index is projected to improve to -8 in December from -15 previously [7] Stock Market Performance - Wall Street's main stock indexes closed higher, with notable gains in chip stocks such as Micron Technology (+4%) and ON Semiconductor (+2%). Warner Bros. Discovery rose over +3% following a significant backing for its acquisition bid [3] - The Euro Stoxx 50 Index increased by +0.02%, with healthcare stocks outperforming, particularly Novo Nordisk, which gained over +7% after FDA approval of its obesity drug [8] - Asian stock markets, including China's Shanghai Composite Index and Japan's Nikkei 225, closed higher, with gains attributed to non-ferrous metal stocks and semiconductor stocks [10][11] Corporate News - ZIM Integrated Shipping Services saw a pre-market increase of over +8% after announcing multiple acquisition offers [12] - Parsons Corp. gained over +3% in pre-market trading after securing a significant contract with the Missile Defense Agency, valued at up to $151 billion [13] - Ametek rose about +1% in pre-market trading following an upgrade to Buy from Hold by TD Cowen, with a price target of $230 [14]