Tencent sells 273 million Kuaishou shares; UBS maintains its 12-month Buy view

Overview

This report is a quick review by UBS of Kuaishou Technology (01024.HK). The key event is Tencent's sale of 273 million Class B Kuaishou shares through a block trade, reducing its stake from 15.7% to 9.4%. UBS believes the event may affect market sentiment in the short term but does not change its positive 12-month view on Kuaishou.

Core views

UBS's core views are: first, Tencent still retains a substantial stake after the reduction and may maintain a shareholding level near the current level in the short term; second, Tencent's recent investment in Kling indicates that Kuaishou's strategic value in video generative AI and the content ecosystem remains recognized; third, Kuaishou still has HK$7.65 billion in remaining repurchase capacity, which, together with its undemanding valuation, should help cushion short-term downside pressure; fourth, UBS continues to assign a Buy rating and a target price of HK$70.00.

Analysis framework

The report combines an event-driven review with fundamental valuation: it first assesses the impact of Tencent's block-trade share sale on the ownership structure and market sentiment, then evaluates the investment implications in conjunction with Tencent's investment in Kling, Kuaishou's repurchase capacity, valuation level, and 12-month forecast return. For valuation, UBS uses a DCF method to derive Kuaishou's target price.

Methodology notes

• Valuation methodDCF

  Discounted cash flow valuation

  UBS states that it uses the DCF method to derive Kuaishou's target price of HK$70.00.

• Earnings forecastForecast Stock Return

  Forecast stock return

  The report discloses forecast share price appreciation of 52.2%, a forecast dividend yield of 1.6%, and a forecast stock return of 53.8%; compared with the market return assumption of 11.1%, this results in a forecast excess return of 42.7%.

Asset mapping & comparison

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

• Kuaishou Technology (01024.HK)

  Core covered asset

  Strengths

  Has diversified monetization businesses spanning short video, live streaming, e-commerce, online marketing, and gaming; UBS believes its strategic value continues to be supported by Tencent-related investment actions; remaining repurchase capacity and low valuation provide downside support.

  Weaknesses

  Tencent's share sale may damage short-term market sentiment; 2026E net cash is forecast to turn into net debt, and the pace of profitability and investment still requires monitoring.

  Comparison

  The report cites iResearch as stating that Kuaishou was previously the world's second-largest short-video platform by daily active users, the second-largest live-streaming e-commerce platform by GMV, and the largest live-streaming platform by tipping revenue.

  Risks

  Intensifying competition, tighter regulation, slower-than-expected commercialization of core businesses and video GenAI, a slowdown in the Chinese economy weighing on advertising revenue, higher-than-expected investment, and weaker-than-expected profitability.

• Class B Kuaishou shares held by Tencent

  Event-related holding

  Strengths

  Tencent still holds 9.4% after the sale, and UBS believes it may maintain its stake in the short term; its recent investment in Kling indicates that the strategic relationship remains valuable.

  Weaknesses

  The block-trade share sale itself may be interpreted by the market as a decline in confidence among strategic shareholders.

  Comparison

  The stake declined from 15.7% to 9.4%.

  Risks

  Further selling could once again create supply pressure and a negative sentiment shock.

Key data

• Tencent share sale volume273 million Class B Kuaishou sharesSold through a block trade.
• Change in Tencent's stake15.7% to 9.4%Disclosed in the report title.
• 12-month ratingBuyUBS's 12-month rating for Kuaishou.
• 12-month target priceHK$70.00UBS's target price.
• Current priceHK$46.00Price date: July 6, 2026.
• Forecast share price appreciation52.2%Based on the forecast price appreciation disclosed in the report.
• Forecast dividend yield1.6%Forecast dividend yield disclosed in the report.
• Forecast stock return53.8%Forecast stock return disclosed in the report.
• Remaining repurchase capacityHK$7.65 billionThe report believes this can provide downside support.
• Market capitalizationHK$199 billion / US$25.3 billionDisclosed in the trading data and key metrics table.
• 52-week price rangeHK$91.85-40.88Disclosed in the trading data and key metrics table.
• 2026E revenueRmb146,836mDisclosed in UBS's financial forecast table.
• 2026E EPSRmb3.81UBS's diluted EPS forecast.

Impact & implications

In the short term, Tencent's share sale may raise concerns that the strategic shareholder will continue to exit, weighing on sentiment toward Kuaishou's share price; however, UBS believes the remaining stake, Tencent's investment in Kling, the repurchase capacity, and valuation support make this more of a short-term sentiment shock than a signal of fundamental deterioration. As the market gradually absorbs the selling pressure, investment focus may return to Kuaishou's monetization, progress in video GenAI, profitability, and execution of share repurchases.

Risks

• Intensifying competition may lead to user growth falling below expectations or user time being diverted.
• Tighter regulation of the online video, live-streaming, e-commerce, and online gaming industries.
• Commercialization of core businesses and video GenAI-related projects progressing below expectations.
• A slowdown in the Chinese economy may reduce the growth rate of online advertising revenue.
• Higher-than-expected investment or weaker-than-expected profitability.
• Further reductions by Tencent may create market sentiment and liquidity pressure.

What to watch

• Whether Tencent continues to reduce its Kuaishou holdings.
• The pace of execution of Kuaishou's HK$7.65 billion remaining repurchase capacity.
• Commercialization progress of Kling and the video generative AI business.
• Growth and margin changes in core businesses such as online marketing, e-commerce, and live streaming.
• The impact of regulatory policies on short video, live streaming, e-commerce, and gaming businesses.
• Kuaishou's share price recovery relative to the HK$70.00 target price and HK$46.00 current price.