Morgan Stanley Overweight Initiation with $15 PT

Morgan Stanley Initiates Coverage on $KC with Overweight Rating, PT $15 Analyst comments: "We initiate coverage on Kingsoft Cloud (KC) with an Overweight rating and US$15 price target. KC is a pure and elastic AI cloud play and is the preferred name in our Greater China IT services and software coverage. Over 2025-28, we forecast a 35% revenue CAGR and a 79% adjusted EBITDA CAGR driven by the AI cloud business. AI contributed 34% of revenue in 4Q25, and we forecast this to rise to >40% in 2026 and >60% by 2028. The adjusted operating margin upside, 6.9% in 2028 versus -1.6% in 2025, is backed by favorable unit economics of GPU cloud and potentially MaaS. We derive our price target from a 5.5x 2027e EV/EBITDA multiple, at a discount to the U.S. neocloud peer median of 10x to reflect greater uncertainty around supply chain availability. We prefer EBITDA for comparability across companies, given differences in depreciation policies and limited EBIT. Key downside risks include supply-side restrictions leading to procurement shortfall, higher-than-expected interest rates leading to higher cost of funding, and slower-than-expected AI model developments in China." Analyst: Yang Liu