Kling Seeks $20 Billion Independent Financing; Kuaishou Implied Valuation Has Upside Potential

Overview

Morgan Stanley released a research report commenting on market rumors regarding Kuaishou Technology (1024.HK)'s AI video model 'Kling' seeking independent financing. The report points out that if Kling successfully raises capital at a $20 billion valuation, it will be far higher than conservative calculations previously made by institutions and bring significant upside potential to Kuaishou's overall valuation. However, Kuaishou officials have not yet confirmed this news, and Morgan Stanley currently maintains its 'Equal-weight' rating and HK$55 target price.

Core views

Financing Valuation Comparison and Premium Space: According to media reports, Kling is seeking an independent listing with a $20 billion valuation. Assuming its year-end ARR (Annual Recurring Revenue) reaches $1 billion, this valuation corresponds to a 20x ARR multiple. Compared to AI model peers Minimax (30x) and Zhipu (approx. 60x), this multiple is relatively reasonable but significantly higher than Morgan Stanley's previous SOTP model valuation given to Kling of $6 billion (based on 20x 2026 expected P/S). Re-assessing Kuaishou Share Value: Morgan Stanley believes that given the market gives higher valuation multiples to pure AI players, if this financing deal ultimately lands, it will release huge value for Kuaishou. The institution conducted scenario calculations: If Kuaishou's core business (excluding Kling losses) is given an 8x 2026 expected P/E, and Kling is valued at the reported $20 billion with a 30% holding company discount included, Kuaishou's fair value per share could reach HK$68. This calculation result is not only higher than the current closing price of HK$51.60 but also close to Morgan Stanley's set 'bull case' valuation of HK$72. Core Business Valuation is at Low Levels: From a reverse logic perspective, based on the same assumptions above, Kuaishou's current market cap only implies its core business 2026 expected P/E ratio is about 5x, indicating that the market's pricing for its traditional core business is quite pessimistic, and the potential revaluation of AI assets will become an important catalyst.

Analysis framework

The research report mainly adopts the approach of combining Sum of the Parts (SOTP) valuation method with scenario analysis. First, split Kuaishou into 'core business' and 'AI innovation business (Kling)' parts to price separately; second, introduce primary market and peer benchmarking logic, using the financing amount and ARR expectations from media reports to calculate the independent market pricing of AI assets; finally, introduce 'holding company discount' to sum up the two parts of value and perform a reverse decomposition with the current market cap, thereby intuitively showing investors the extremely low implied valuation of the core business in the current stock price, arguing for the leverage effect of asset spin-off or financing on the parent company's market cap.

Methodology notes

• Valuation MethodSOTP Segmented Valuation

  SOTP (Sum of the Parts) Segmented Valuation Method

  When a company owns multiple disparate business segments (such as Kuaishou's traditional short video/live streaming business and cutting-edge AI large model business), the overall P/E ratio often fails to accurately reflect the true value of each business segment. The SOTP method splits each business segment, independently valuing them with the most suitable valuation multiples (e.g., P/E for core business, P/S or ARR multiple for high-growth AI business), then sums them up, thus more accurately assessing the intrinsic value of diversified enterprises.

• Valuation MethodOthers

  Holding Company Discount (Holdco Discount)

  In cases where a parent company holds equity in a subsidiary, due to management costs at the parent level, tax frictions, minority interest factors, etc., the subsidiary equity value enjoyed by the parent company cannot usually be fully realized 1:1 in the secondary market. Therefore, in SOTP valuation, a discount is usually applied to the subsidiary valuation (such as the 30% used in this piece) to reflect such liquidity and structural discounts.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Kuaishou Technology (1024.HK)

  Parent company of Kling independent financing, expected to release huge value through AI asset revaluation

  Strengths

  Underlying AI model Kling possesses extremely strong commercialization potential and independent financing capability, core business cash flow is stable

  Weaknesses

  Core business growth faces industry competition pressure, market prices its traditional business at an extremely low valuation

  Comparison

  -

  Risks

  Ad revenue growth falls short of expectations; revenue sharing and overseas expansion drag down margins; MAU growth affected by competition

Key data

• Kling Financing Seeking Valuation$20 billionAssuming year-end ARR reaches $1 billion, corresponding to 20x ARR multiple
• Morgan Stanley Previous SOTP Kling Valuation$6 billionBased on 20x 2026 expected P/S
• Scenario Calculation Per Share ValueHK$68Core business 8x P/E + Kling $20 billion valuation (discounted by 30%)
• Current Market Cap Implies Core Business P/E5xBased on 2026 expectation, reflecting traditional business valuation at low level
• Target PriceHK$55.00Maintain Equal-weight rating, current closing price HK$51.60

Impact & implications

The research report believes that if the news about Kling's independent financing is true and proceeds smoothly, it will become a key catalyst for Kuaishou's value revaluation. It not only proves that the commercialization potential of Kuaishou in the AI large model field has gained recognition from the capital market, but also exposes that in the current Kuaishou total market cap, the market's pricing for its core business is already at a very low level (implying 5x P/E). This event is expected to prompt the market to re-examine Kuaishou's asset structure; the independent pricing of AI businesses will effectively boost the valuation center of gravity of the parent company.

Risks

• Ad revenue growth falls short of expectations
• Revenue sharing, increased sales and marketing expenses, and overseas expansion lead to margin pressure
• Intensified industry competition or marketing cuts lead to MAU (Monthly Active Users) growth falling short of expectations
• Kling independent financing news has not been officially confirmed yet, exists uncertainty

What to watch

• Kuaishou official's subsequent response to Kling independent financing rumor and substantive progress
• Whether Kling year-end ARR (Annual Recurring Revenue) can achieve the $1 billion target as scheduled
• Profit margin improvement of Kuaishou core business (advertising, e-commerce, etc.)