During the 618 promotion of 2024, Kuaishou emphasized more on good products at low price, with simpler approach and extended period. Pan shelf-based ecommerce performed well, with orders/paying users +65%/57% YoY. We estimate its GMV share from pan shelf-based ecommerce to be >25%, and 2Q24E ecommerce growth would be intact (forecasting GMV/other services revenue +25%/24% YoY). Despite mixed third party industrial data, we are positive on Kuaishou's share gain in 618, and expect ecommerce upside from rising MAC and shelf-based mall penetration. On top of that, we are confident on KS's earnings upside, with continuous margin improvement. Maintain BUY with unchanged TP at HK$97.

Solid growth in 618, despite mixed industrial data. Kuaishou released its 618 promotions performance, with pan shelf-based ecommerce orders/paying users +65%/57% YoY, search payment orders/users +55%/58% YoY, and SFV-based GMV +66% YoY during 618 (20 May- 18 Jun). Meanwhile, active merchants grew 26% YoY, in which SME merchants +28% YoY. By category, consumer electronics & furniture GMV surged over 83% YoY, in which brand pan shelf-based GMV increased by over 177% YoY. Mobile phone segment increased by over 129% YoY. During 618, Kuaishou emphasized more on good products at low price, with simpler approach and extended period. However, third party data from Syntun and Analysys suggested mixed industrial GMV trend during 618. According to Syntun data, livestreaming ecommerce GMV slowed down to 12% YoY (vs. 28% in 2023), while industry GMV -7% YoY (vs. +15% in 2023). Kuaishou GMV was estimated at +16% YoY (vs. Douyin +26%; key platforms +14% on average), based on Analysys data. We view such moderate momentum was mainly due to discount & subsidies normalization in daily operation. We are positive on Kuaishou's ecommerce performance in 2Q24E (forecasting GMV/other services revenue +25%/24% YoY), backed by rich offerings, rising MAC and shelf-based mall penetration.

AIGC on good progress, with video generation model "Kling" launched. Kuaishou unveiled its self-developed video generation model, Kling, in Jun. Utilizing DiT, Kling can generate complex spatiotemporal motions and simulate the characteristics of the physical world, and transform text prompts into high-quality AI videos of up to two minutes. It is available for beta testing within "KuaiYing (快影)".

Maintain BUY. We keep our financials forecast unchanged, with SOTP- based TP at HK$97. Upcoming quarterly results would be the short-term catalysts, and we are bullish on its margin upside ahead.