Morgan Stanley Adds MiniMax to the China/HK Focus List

Overview

This report adjusts Morgan Stanley's Mainland China and Hong Kong equity strategy Focus List: adding artificial intelligence model company MiniMax (0100.HK) and removing Duality Biotherapeutics (9606.HK). The core judgment is that the market still underappreciates MiniMax's multimodal capabilities, and future M3 updates, H3 commercialization, and M3 Pro scaling may drive revenue growth and valuation re-rating.

Core views

Recent developer feedback on MiniMax's M3 model has been weak, with the main issues including smaller model scale, higher pricing, and insufficient programming performance. However, the analysts believe M3 is closer to a validation version of the sparse attention architecture and does not fully represent the company's large language model capabilities. Recent updates are expected to improve programming capability, while the 2 to 3 trillion-parameter M3 Pro launching in September to October will become a more important test of frontier performance and pricing power. Beyond large language models, the video multimodal capability represented by H3 may form a second annual recurring revenue growth curve. The analysts maintain their 2026 annual recurring revenue forecast of US$1bn, but expect growth to be more concentrated in the second half and dependent on the delivery of H3 and M3 Pro.

Analysis framework

The report uses a method combining the strategy Focus List with stock-specific fundamental catalysts: first adjusting the list based on analysts' relative ratings, product competitiveness, and future event catalysts, then evaluating the Focus List's historical total return relative to the MSCI China Index using an equal-weighted portfolio rebalanced when constituents change. Stock-specific analysis focuses on model performance, pricing power, multimodal product potential, annual recurring revenue, and financing support for compute investment.

Methodology notes

• Strategy Stock SelectionChina/Hong Kong Focus List

  Include high-conviction stocks in an equal-weighted strategy portfolio and rebalance when constituents are added or removed.

  List adjustments comprehensively consider analyst ratings, fundamentals, catalysts, and relative return potential; inclusion on the list is not equivalent to an unconditional buy recommendation.

• Relative RatingOverweight Rating Framework

  Expected risk-adjusted total return over the next 12 to 18 months is above the average level of the analyst's industry coverage universe.

  Morgan Stanley uses relative ratings such as Overweight, Equal-weight, Not Rated, and Underweight, and does not directly use Buy, Hold, or Sell as formal stock ratings.

• Portfolio PerformanceEqual-Weighted Total Return Comparison

  Treat the Focus List as an equal-weighted portfolio and compare it with the total return of the MSCI China Index.

  The calculation includes dividends and excludes brokerage commissions, with rebalancing when the list changes; historical performance is unaudited and does not represent future performance.

Asset mapping & comparison

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

• MiniMax (0100.HK)

  Newly added to the China/HK Focus List and maintained at an Overweight rating

  Strengths

  Multimodal capabilities are viewed as not yet fully appreciated; H3 is among the world's leading video models; M3 Pro may improve frontier performance and pricing power; the financing plan supports continued compute investment.

  Weaknesses

  The existing M3 is smaller in scale, priced higher, and weaker in programming performance, triggering negative developer feedback; 2026 revenue growth is relatively dependent on product launches in the second half.

  Comparison

  The analysts expect its risk-adjusted total return to exceed the average level of the industry coverage universe and include it in the Focus List managed relative to the MSCI China Index.

  Risks

  M3 updates or M3 Pro performance may fall short of expectations, pricing competitiveness may be insufficient, multimodal commercialization may slow, financing may lead to equity dilution, and returns on training and inference compute investment may fall short of expectations.

• Duality Biotherapeutics (9606.HK)

  Removed from the China/HK Focus List

  Strengths

  The report provides no new analysis of strengths.

  Weaknesses

  The report does not specify the fundamental reason for removal from the list.

  Comparison

  Strategy attention has declined relative to MiniMax, but this cannot be used to directly infer a formal rating downgrade.

  Risks

  Without the reason for removal, the latest rating, valuation, and operating data, its fundamental changes cannot be judged solely based on this report.

• MSCI China Index

  Main historical performance comparison benchmark for the China/HK Focus List

  Strengths

  Provides a broad relative return benchmark for the China equity market.

  Weaknesses

  Its industry and individual-stock concentration differs from an equal-weighted, high-conviction Focus portfolio.

  Comparison

  The Focus List's total return since inception was 113.5%, higher than the index's 43%; over the past 12 months it was 14.8%, higher than the index's -6.1%.

  Risks

  Historical relative returns are unaudited and do not guarantee continued future outperformance.

Key data

• MiniMax Analyst RatingOW (Overweight)Covered by Gary Yu and Lydia Lin.
• MiniMax Listed PriceUS$41.9Data as of 2026-08-10.
• MiniMax Target-Price Upside173.6%The report table did not explicitly list the absolute target price in the extracted content.
• 2026 Annual Recurring Revenue ForecastUS$1bnThe forecast is unchanged, but growth is expected to be more concentrated around the launches of H3 and M3 Pro.
• Planned Financing SizeApproximately US$2bnPlanned to be raised through equity and convertible bond financing to support investment in model training and inference compute.
• M3 Pro Parameter Scale and Timing2 to 3 trillion parameters, expected September to October 2026Its frontier performance, pricing power, and scaled performance are key upside catalysts.
• Total Return Since Focus List Inception113.5%Since 2014-09-03, the MSCI China Index total return over the same period was 43%.
• Focus List Total Return Over the Past 12 Months14.8%The MSCI China Index total return over the same period was -6.1%.

Impact & implications

Inclusion on the Focus List reinforces the positive strategy signal for MiniMax. If M3 updates improve programming performance, H3 generates stable commercial revenue, and M3 Pro scales successfully, the company may benefit from both revenue growth and valuation re-rating. Conversely, if model performance, pricing competitiveness, or commercialization progress falls short of expectations, the current relatively high target-price upside expectation may be difficult to realize. For Duality Biotherapeutics, removal from the list weakens the positive signal at the strategy level, but the report provides no clear evidence of a rating downgrade or fundamental deterioration.

Risks

• M3's programming capability, pricing, and developer reputation may be weaker than expected, and subsequent updates may not fully resolve these issues.
• M3 Pro's frontier performance, scaling stability, or pricing power may fall short of expectations.
• 2026 annual recurring revenue growth is back-end loaded and highly dependent on the timely launch and commercialization of H3 and M3 Pro.
• The approximately US$2bn equity and convertible bond financing may bring equity dilution, interest costs, or future conversion pressure.
• Artificial intelligence model training and inference require sustained high compute investment, and commercial returns remain uncertain.
• Morgan Stanley has shareholding, investment banking, market-making, or other commercial relationships with MiniMax and other covered companies, and investors should pay attention to potential conflicts of interest.
• The Focus List's historical returns are unaudited, and historical performance does not represent future performance.

What to watch

• Whether recent M3 updates can significantly improve programming performance and developer feedback.
• Whether the M3 Pro expected to launch in September to October 2026 can achieve a 2 to 3 trillion-parameter scale and leading performance.
• M3 Pro's actual pricing, customer adoption rate, and scaled inference economics.
• The commercialization progress of the H3 video model and whether it can form a second annual recurring revenue growth engine.
• The delivery pace of the 2026 US$1bn annual recurring revenue target, especially second-half growth.
• Completion conditions, cost, use of proceeds, and dilution impact of the approximately US$2bn equity and convertible bond financing.
• Rating, earnings forecast, or fundamental updates after Duality Biotherapeutics is removed from the Focus List.