We expect Kuaishou to report 2Q25 results in late August. We expect an inline 2Q25 with 11% YoY topline and 14.6% adj. NPM with accelerated Kling monetisations. We reckon Co. is progressing well on its AI strategies especially Kling AI regarding version upgrades, integrations with internal ad and eC, external 2B clients’ expansions across various verticals, tiered-pricing mechanisms of multi-flexible 2B and 2C monetisations and branding initiatives. We currently estimate Kling will contribute 0.8% of total revenue in 2025 and will sustain its global leading position with committed investments. Maintain HOLD with raised TP of HK$65.0 on 13.0x 2025E adj. PER.
　　Key Factors for Rating
　　Well executed AI strategies. We see Co. is successfully executing its accelerated AI strategies , especially Kling AI in terms of i) versions upgrades with innovative features; ii) integrations with internal core ad and eCommerce; iii) expansion of various external industry verticals; iv) tiered- pricing mechanisms with flexible monetisation channels for both 2B and 2C (majority are professional users); and v) brand marketing initiatives. We believe Kling AI will solidify its global leading positions in the near to midterm due to extensive video data assets, advanced algorithms, concentrated strategies and efficient organisational structures . We currently estimate Kling AI to contribute RMB1.2bn revenue (0.8% of total revenue) in 2025 primarily driven by improved paying penetration of expanded global users. We see no material strategic change of core online ad and eC with stable competitive landscape amid gradual macro recovery. Thus, we maintain our FY2025-27E online ad and eC GMV forecasts unchanged despite raising our Kling revenue estimates. We raise our FY2025-27E total opex assumptions by 1-2% due to committed AI investments, leading to -1% cut of FY2025-26E adj. EPS.
　　2Q25 preview: inline quarter with accelerated Kling monetisations. We expect healthy user metrics and model total revenue to rise 11% YoY to RMB34.5bn, in line with consensus, among which streaming, online ad and eC & others logging 5% YoY, 12% YoY and 22% YoY respectively. We expect Kling to continue accelerating its monetisations and forecast ~RMB270m revenue in 2Q25. We estimate eC GMV to grow 13% YoY, in line with consensus. GPM/ adj. NPM of 55.6%/ 14.6% both meet streets’ expectation.
　　Key Risks for Rating
　　Upside risks: 1) monetisations ramp up of AI and new initiatives; 2) domestic consumption recovery; 3) increased shareholder return initiatives.
　　Downside risks: 1) regulations; 2) intensified competition; 3) slower-than- expected macro recovery; 4) ineffective strategy executions; 5) content supply and source; 6) ineffective monetisation; 7) main shareholders’ divestiture.