Daiwa: First gives Z.AI (02513) a "Buy" rating with a target price of HKD 1,500.

Daiwa released a research report stating that it has initiated coverage of Z.AI (02513) with a "Buy" rating and a target price of HKD 1,500. Daiwa noted that the stock sell-off in July exposed the core risks associated with holding cutting-edge model developers, and the emergence of "Kimi K3" from the dark side of the month has reminded investors that a model's leading position can change hands in a matter of weeks. However, the firm believes that the investment value will depend on Z.AI's ability to maintain proximity to the technological forefront through its research foundation at Tsinghua University, frequent model iterations, coding and agent feedback from real-world workloads, full-stack reasoning engineering, and compatibility with domestic chips. In the long term, the firm expects that Z.AI's technological momentum will revenue, ultimately achieving profitability. Z.AI's annual recurring cloud revenue reached USD 1 billion in July of this year, five months ahead of the company's goal. The firm forecasts that the group's revenue will grow from RMB 724 million in 2025 to RMB 47.5 billion in 2029, implying a compound annual growth rate of 185%. The firm also anticipates that its Model as a Service (MaaS) will become Z.AI's primary source of revenue. With improvements in pricing, reasoning efficiency, and utilization rates, the group's gross margin is expected to recover from a low of 31% in 2026 to 40% in 2029, with adjusted profits recorded in 2029.