BlueFocus (300058 CH): Buy: AI monetisation accelerating

Solid overseas advertising growth; AI-related business is still on track; maintain Buy with a lower target price of RMB22.30 (from RMB24.20). BlueFocus reported 2Q26 revenue of RMB15.8bn (down 13% y-o-y) and net profit of RMB85m (up from breakeven in 2Q25), above our expectations, mainly because the gross margin of its overseas advertising was above our previous expectation. We lower our 2026-27e net profit estimates by 4.4% and 23.6%, respectively, and lower our 2026-27e revenue estimates by 4.8% and 4.9%. BlueFocus's 'All in AI' strategy is well on track: in 1H26 AI-driven revenue reached RMB2.85bn, up 81% y-o-y, while R&D investment surged 173% y-o-y. We expect AI-driven revenue to account for 15%, 25% and 35% of total revenue in 2026-28e, with a 61% CAGR. We maintain Buy and lower our target price to RMB22.30 (from RMB24.20), using a 1.0x 2027e target PS, implying c74% upside from the current share price.