Core Viewpoint - Keep has successfully transitioned to profitability by fully embracing AI, marking a significant shift in its business model and positioning in the market [2][4][12]. Financial Performance - In the first half of the year, Keep reported total revenue of 820 million RMB, with a gross profit of 429 million RMB and a gross margin of 52.2%, reflecting a year-on-year increase of approximately 6.2 percentage points [5]. - The adjusted net profit reached 10.35 million RMB, indicating a turnaround from previous losses attributed to heavy investments in AI and new strategic initiatives [2][8][9]. Strategic Transformation - Keep's pivot to AI is not merely a trend but a strategic necessity that has led to structural improvements in its operations and financials [21]. - The introduction of AI Coach, a personalized training assistant, has significantly enhanced user engagement, with over 150,000 daily active users reported in July [13][14]. - Keep's business model has shifted from content subscription to service subscription, where users pay for results and experiences [31]. User Engagement and Retention - The AI features have led to higher user retention rates, with a 50% retention rate for the AI diet tracking function and an overall daily active user retention rate of 79% [14]. - Keep's monthly active users reached 22.49 million, with 2.8 million monthly subscription members, indicating a robust user base [30]. Market Positioning and Future Outlook - Keep's long-standing infrastructure and user base provide a competitive advantage in the AI space, allowing for rapid product development and market adaptation [25][26]. - The company is positioned to leverage AI to create a comprehensive ecosystem that integrates training plans, nutritional analysis, and behavioral guidance, enhancing user experience and loyalty [40][42]. - The shift towards an "AI SaaS" or "AI application platform" model reflects a broader trend in the market, where traditional applications are redefined through AI capabilities [44].

Investment Rating - The report maintains a "Buy" rating for the company with a target price of HKD 8.82 [7][8]. Core Insights - The company achieved a turnaround to profitability with a non-IFRS net profit of HKD 0.1 billion in 1H25, driven by improved gross margins from optimized product mix and disciplined cost control measures [1][5]. - The focus is on an AI-driven business transformation, with significant progress in the deployment of a multi-agent MAS system, iterations of the Keep AI Coach, and innovations in AIGC workflows [1][4]. - The report highlights potential user growth and increased payment rates from upcoming AI feature updates in the app, alongside cost-reduction initiatives to enhance profitability [1][5]. Revenue and Profitability - The company's total revenue for 1H25 was HKD 8.2 billion, a year-on-year decrease of 20.8%, while the gross margin improved to 52.2%, up 6.2 percentage points year-on-year [2][5]. - The self-branded sports products segment saw a revenue decline of 20.9% to HKD 4.0 billion, but its gross margin increased by 3.3 percentage points to 34.8% due to a focus on higher-potential categories [2][5]. - Online membership and paid content revenue decreased by 22.9% to HKD 3.4 billion, with a gross margin of 71.3%, reflecting improved operational efficiency [2][5]. User Metrics - The average monthly active users decreased by 24.2% to 22.49 million in 1H25, while the average revenue per user increased by HKD 0.3 to HKD 6.1 [3][4]. - The subscription membership count averaged 2.79 million, with a penetration rate of 12.4%, indicating a strategic shift towards user retention rather than sheer growth during the AI feature enhancement phase [3][4]. AI Transformation Progress - The company has made significant strides in its AI transformation, achieving three key developments: the completion of the multi-agent MAS infrastructure, continuous iterations of the AI Coach, and advancements in AIGC course production [4][5]. - As of July, the AI core daily active users (DAU) surpassed 150,000, with plans to exceed 1 million by 2025 [4][5]. Financial Forecasts and Valuation Adjustments - Revenue forecasts for 2025, 2026, and 2027 have been adjusted downwards by 15.4%, 7.2%, and 1.4% to HKD 18.3 billion, HKD 21.1 billion, and HKD 23.5 billion respectively, primarily due to the streamlining of non-core inefficient businesses [5][13]. - Non-IFRS net profit forecasts for the same years have been revised upwards to HKD 0.6 billion, HKD 1.0 billion, and HKD 1.6 billion, reflecting improved gross margins and ongoing cost-reduction efforts [5][13]. - The target price-to-sales (PS) ratio for 2025 has been increased to 2.3x, with the target price set at HKD 8.82, which remains at a discount compared to the average of comparable companies [5][13].

Core Insights - Keep's founder Wang Ning outlined four strategic directions for the company: "All in AI, hardware ecosystem, multi-scenario fitness, and globalization" in an internal letter marking the company's tenth anniversary, aiming to reshape its future amidst ongoing losses [1] - The company's mid-2025 financial report revealed an adjusted net profit of 10.35 million yuan, a significant improvement from a loss of 161 million yuan in the same period last year, although a loss of 35.43 million yuan remains when accounting for international standards [1] - The improvement in cash flow is attributed to cost-cutting measures, including the elimination of low-margin SKUs and reduced sales expenses, rather than a fundamental change in the business model [1] User Metrics - During the pandemic, Keep's monthly active users surged from 29.73 million to 36.39 million, but by 2023, this number plummeted back to 29.76 million, and further declined to 22.49 million in the first half of 2025, representing a nearly 40% drop from peak levels [2][3] - Competitors like Douyin and Xiaohongshu continue to attract users with free fitness courses, with related content increasing by 40% in 2024, while Keep's engagement has waned significantly [3] Revenue Structure - The revenue structure remains tied to four legacy business segments, all of which are contracting: - Membership subscriptions fell by 22.9% year-on-year to 337 million yuan, with users expressing dissatisfaction over the perceived lack of value in membership [3] - Self-branded sports product revenue decreased by 20.9% to 397 million yuan, as pandemic-driven hardware demand proved to be a one-time spike [3] - Advertising revenue dropped to 88 million yuan, down 11%, indicating challenges in balancing user experience with advertising needs [3] Competitive Landscape - The fitness industry is becoming increasingly competitive, with offline chains like LeKe and Super Monkey expanding aggressively, while platforms like Douyin and Bilibili are offering daily fitness live streams at minimal cost [4][5] - Despite claiming to be the "industry leader," Keep's market share is diminishing as the overall market shrinks, leading to a situation where high market share equates to being a tall figure in a shallow pool [5]

Keep(3650.HK)午后拉升，一度涨4.55%，报5.75港元。消息面上，近日，Keep创始人王宁在公司内部动 员会发言流出，王宁总结2025年上半年Keep公司的盈利状况称，"我们是持续性的盈利，我们完成了一 次真正意义上的增肌，把所有的脂肪，把所有不健康的增长基本上都去掉了"。 日前，Keep发布盈利预告表示，非国际财务报告准则计量下，公司于2025年上半年经调整利润净额约 人民币1000万元。 在动员会上，王宁总结了Keep创业10年来"做对"的几个关键要素。创业伊始，大家都认定运动健身是一 个高价值赛道，团队"只要穿越沙漠、穿过无人区，必将迎来绿洲、迎来宝藏"。但如何寻找方向、找对 目标，是最大的难题。他认为，APP时代Keep的出现，最大的关键在于提升了健身的效率，降低了用户 健身的时间、金钱门槛以及获得、使用运动内容的效率，这也体现了"工具的本质"。而今天，Keep要全 力all in AI ，亦是要进一步提升健身效率。 "随着AI Agent教练时代的到来，能够干掉Keep的，一定是一款更加高效、便捷的产品，而Keep目前要 做的，就是成为这一产品，去自我颠覆，完成健身产品的迭代。" ...

Core Viewpoint - Keep's recent earnings announcement indicates a significant improvement in profitability, with a loss of approximately RMB 36 million for the first half of 2025, a 78% reduction from RMB 163 million in the same period last year, and an adjusted net profit of about RMB 10 million, signaling a successful strategic pivot towards AI [1][2]. Group 1: Financial Performance - The company's core financial indicators show accelerated recovery, with improved gross margins and significantly reduced losses despite a challenging strategic transition [2]. - The positive financial results are attributed to a focus on optimizing business structure and revenue quality, leading to increased gross margins and enhanced operational efficiency through AI technology [2][3]. Group 2: AI Technology Integration - Keep launched Kinetic.ai, a specialized AI model for the sports and health sector, trained on data from 400 million users, which customizes workout plans for users [3]. - The introduction of the AI coach Kaka enhances user experience by providing personalized training plans and multi-modal capabilities, including voice control and image recognition [3][4]. - Keep's hardware products, such as the Keep Watch Pilot 1, serve as essential infrastructure for user retention and data accumulation, evolving from mere revenue supplements to core components of the business model [4][5]. Group 3: Market Position and Future Outlook - The market has mixed reactions to Keep's AI strategy, with some concerns about profitability and competition, while others see potential in the intelligent restructuring of the sports health industry [6]. - Institutions like Guosen Securities and Huatai Securities express optimism about Keep's future, recognizing the shift from a simple tool-based app to an AI application as a significant valuation change [6][7]. - The national health policy aimed at improving weight management awareness and skills by 2026 creates a larger potential user base for Keep's AI health management services, transitioning from optional to essential consumption [7][8]. Group 4: Revenue Model Transformation - The traditional fitness industry's bottleneck of scarce professional trainers is being addressed by Keep's AI-generated content, which now constitutes nearly 15% of its course offerings [8]. - The AI Coach redefines the revenue model from "content commodification" to "service experience," enhancing user engagement and payment motivation [8][9]. - The integration of AI allows for a dynamic service loop that simulates the emotional support of in-person trainers, potentially increasing the average revenue per user (ARPU) significantly [9][10]. Group 5: Conclusion - The combination of policy-driven demand and AI-enhanced personalized services is expected to catalyze unprecedented growth in the fitness industry, positioning Keep for a potential market explosion [10].

Core Insights - Keep is expected to report a loss of approximately 36 million yuan for the six months ending June 30, 2025, a reduction of about 78% compared to a loss of 163 million yuan for the same period ending June 30, 2024 [1] - The company anticipates an adjusted net profit of around 10 million yuan for the same period, compared to an adjusted net loss of 161 million yuan for the previous year [1] Group 1 - The improvement in profitability is attributed to a focus on optimizing business structure and revenue quality, leading to an increase in gross margin [3] - The integration of AI technology is expected to enhance operational efficiency and reduce operating costs, despite a short-term revenue contraction due to the streamlining of inefficient product categories [3] - The strategic focus remains on two core areas: AI integration in the app and the continued profitable growth of proprietary fitness products [3] Group 2 - The company aims to enhance user experience and retention through AI-driven improvements in sports scenarios and tools [3] - Keep plans to optimize its product structure and launch new products that meet market demand while expanding sales channels to increase market coverage [3] - On February 4, during its 10th anniversary, the founder emphasized a commitment to "All in AI" and developing a data-centric hardware ecosystem to expand the brand's presence in various sports scenarios and global markets [4]

Group 1: Market Trends and Growth - The health consumption market in China is expanding, with the total revenue of the health industry expected to reach 9 trillion yuan in 2024, up from 8 trillion yuan in 2021, indicating significant growth [2] - The demand for health services is shifting from a single focus on medical services to a diversified approach, leading to innovative business models and a variety of health-related products and services [2][4] - The popularity of "health tourism" and related activities reflects a change in consumer attitudes towards health and wellness, with a growing emphasis on quality of life and holistic health management [4][7] Group 2: Consumer Behavior and Preferences - Young consumers are increasingly prioritizing health-related spending, with "health maintenance" ranking among the top three expenditure categories for individuals aged 18-35 [8] - There is a notable rise in the consumption of health products among young people, with 78.2% of surveyed youth having paid for health products, indicating a shift towards nutrition and wellness [8][9] - The trend towards low-sugar and low-calorie health foods is gaining traction among younger demographics, with innovative products tailored to their preferences emerging in the market [8][9] Group 3: Technological Integration in Health Products - The integration of smart technology in health products is on the rise, with sales of health monitoring devices like smart wristbands increasing by 41.6% year-on-year in the first quarter [12] - Companies are leveraging artificial intelligence to enhance user experience in fitness apps, with platforms like "Keep" offering personalized training plans and a wide range of courses [12][13] - The demand for interactive and personalized health services is driving innovation in the health tech sector, leading to the development of smart fitness equipment and applications that cater to individual health needs [11][13]