Core Viewpoint - The report from CICC maintains the earnings forecast and outperform rating for Kuaishou-W (01024), with a target price of HKD 89, indicating an upside potential of 18% based on 15/13x 25/26 year Non-IFRS P/E [1] Group 1: OneRec Recommendation System - Kuaishou launched the end-to-end generative recommendation model OneRec during the 2Q25 earnings disclosure, which enhances user engagement through deep understanding of user behavior and dynamic adaptation [2] - OneRec's architecture significantly reduces communication and storage costs, with operational costs only 10.6% of traditional recommendation processes; it currently handles 25% of requests on Kuaishou and Kuaishou Lite, leading to increased user engagement [2] - The model is expected to improve user stickiness and time spent on the platform while reducing bandwidth and user retention costs, with potential applications in marketing and e-commerce [2] Group 2: Keling Ecosystem Development - Keling achieved revenue exceeding 250 million yuan in 2Q25, showing significant quarter-on-quarter growth; the technology has surpassed competitors in performance metrics [3] - Keling upgraded its creator program to empower creators through inspiration values, cash incentives, and Kuaishou traffic support, with AI content viewership increasing by 321% compared to six months ago [3] Group 3: Creator Ecosystem and Commercialization - The creator ecosystem is thriving, with a 100% increase in submissions from creators with over 10,000 followers and an 8% growth in the number of professional streamers [4] - The e-commerce division reports over 6.6 million commercial content posts daily, attracting more than 320 million viewers and generating revenue for 3.7 million creators [4] - Kuaishou is exploring monetization opportunities in emerging content areas such as short dramas and mini-games, expecting to generate significant revenue for creators in the coming year [4]

Company Updates - Kuaishou held an investor day event, sharing its content ecosystem strategy and updates on AI applications [1] - The OneRec recommendation system was launched, significantly improving user engagement and operational efficiency, with operational costs only 10.6% of traditional processes [1] - OneRec currently handles 25% of requests on Kuaishou and has increased user engagement time by 0.54% and 1.24% [1] AI and Content Ecosystem - Keling achieved over 250 million yuan in revenue in Q2 2025, showing significant growth [2] - Keling's AI content playback volume increased by 321% compared to six months ago [2] - The creator ecosystem is thriving, with a 100% increase in submissions from creators with over 10,000 followers and an 8% increase in professional streamers [2] Commercialization and Growth - The platform's daily commercial content exceeds 6.6 million, attracting over 320 million users and generating revenue for 3.7 million creators [2] - New monetization solutions for creators in emerging content areas like short dramas and mini-games are expected to generate significant revenue in the coming year [2] Profit Forecast and Valuation - The company maintains its profit forecast and outperform rating, with a target price of 89 HKD, indicating an 18% upside potential [3]

Core Viewpoint - The company is optimistic about the growth potential driven by AI across multiple dimensions, particularly in video production, e-commerce, and advertising marketing, with a maintained buy rating and target price of HKD 84.0 [1] AI-Driven Performance Growth - The global video production market is projected to reach USD 140 billion by 2024, with AI penetration expected to exceed 50% in the long term, translating to a potential market size of USD 20-30 billion in the next three years [2] - The number of global AI video creators has surpassed 100 million since 2025, marking a 70% year-on-year increase, while AI content viewership on the platform grew by 321% from January to July [2] - The OneRec recommendation model currently covers 25% of peak traffic on the platform, optimizing recommendations and sorting, leading to over 1% growth in total viewing time and reducing costs to about 10% of traditional engines [2] - Daily consumption of AI-generated marketing materials exceeds RMB 30 million, with the company leveraging large models to enhance ad matching and bidding efficiency, boosting overall ad spending on the platform [2] E-commerce Business Resilience - The company anticipates e-commerce GMV growth to exceed industry levels at +15% year-on-year in the second half of 2025, driven by improved supply chain capabilities and leveraging consumption policies [3] - Enhanced integration of short videos and live-streaming e-commerce is expected to improve merchant traffic acquisition efficiency [3] - The OneRec recommendation system has been implemented in shelf scenarios to further drive e-commerce GMV growth [3] Advertising Business Opportunities - In the first half of 2025, the company maintained rapid growth in content-related advertising, although growth may slightly slow in the second half due to higher base effects [3] - The integration with enterprise WeChat and other channels is expected to enhance advertising effectiveness in local services, with strong growth anticipated for FY25 [3] - Despite an overall contraction in the food delivery sector's advertising spending, the company's low exposure to this sector minimizes the impact on overall advertising revenue growth [3]