UBS is bullish on the integration of AI in the online entertainment and education sectors, with Kshort leading the charge.

On February 18, the Hang Seng Index of the Hong Kong Stock Exchange closed up 360.58 points, or 1.59%, at 22976.81 points. Among them, the share price of Khand-W (01024) soared nearly 10% to HK$58.750. On the news front, UBS's latest research report pointed out that the value of artificial intelligence applications in China's online entertainment and education sectors has been seriously undervalued, and Khand, as the global leader in video generation AI models, combined with its current valuation low, deserves more attention from investors. In the report, UBS emphasized that the market's focus on artificial intelligence has long been concentrated on upstream hardware and midstream model operators, but the downstream application layer, especially the fields that are naturally coordinated with China's online entertainment and education business models, is undergoing fundamental changes. The cost reduction and rapid localization of DeepSeek technology have accelerated the empowerment effect of AI on downstream businesses. For example, Khand's self-developed KSL AI video generation model is globally leading. According to Similar Web data, its user engagement is comparable to OpenAI's Sora, and it ranks first in the video generation model ranking of Artificial Analysis. In terms of applications, Khand's artificial intelligence recommendation model has achieved remarkable results. During the 2024 World Artificial Intelligence Conference, Khand shared that its recommendation large model is expected to add billions of minutes of user viewing time to the Khand App every day, which is of great significance to user stickiness and platform activity. In the advertising business, the daily consumption of AIGC marketing materials from marketing clients in the third quarter of 2024 exceeded RMB20 million, accounting for about 10% of the advertising revenue in that quarter, and the ROI of advertisers has been significantly improved under the technical empowerment. However, despite Khand's outstanding business growth and artificial intelligence applications, its valuation is still relatively low. UBS's report showed that Khand's expected price-to-earnings ratio in 2025 is only 10 times, with a 63% discount compared to the global average. UBS believes that this discount is expected to narrow rapidly as the logic of AI application layer deepens.