Key Takeaways:
BofA Securities maintained its Buy rating on Kuaishou Technology (01024.HK) with a HKD63 price target, after the short-video company announced a restructuring and financing of its Kling AI unit that values the business at as much as USD 18 billion.
"The USD 15 billion pre-money valuation corresponds to about 30 times Kling's annualized revenue run rate of USD 500 million for the year ending March 2026, as well as about 14 times our 2027 estimated price-to-sales," BofA Securities said in a report.
Kuaishou shares rose 6.8 percent on the announcement, closing at HKD43.20. The HKD63 target implies about 46 percent upside from that level. The company's Kling AI unit raised an initial USD 2 billion from 21 investors, with a capital increase agreement allowing for up to USD 3 billion total. After the financing and full utilization of the employee incentive scheme, Kuaishou's stake in Kling will be diluted to 68.33 percent.
The spin-off marks a significant value unlock for Kuaishou, whose core short-video business has faced margin pressure from rising AI computing infrastructure costs. Kling's USD 15 billion pre-money valuation compares with about 15 times sales for peer Minimax and more than 70 times for Knowledge Atlas, according to BofA. The financing round included Tencent Holdings Ltd., which separately sold about USD 1.5 billion of its Kuaishou stake at HKD43.25 apiece, paring its holding to 9.37 percent.
The maintained Buy rating and HKD63 target signal BofA's confidence that Kling's standalone valuation can unlock shareholder value beyond Kuaishou's core operations. Investors will watch for Kuaishou's semi-annual results due in mid-August, where the impact of AI infrastructure spending on cash flow will be a key focus.
This article is for informational purposes only and does not constitute investment advice.
