Kuaishou Technology （1024.HK） Lowering growth estimates but still favorable risk~reward； 2Q preview

Investment Rating - The report maintains a "Buy" rating for Kuaishou Technology (1024.HK) with a revised target price of HK$70, down from HK$80 [2][4]. Core Insights - Kuaishou's growth estimates have been lowered, with 2024E GMV growth revised to 20% year-on-year from 25%, and revenue growth to 10% year-on-year [1][4]. - The company is expected to deliver above-consensus earnings and in-line revenue for 2Q24, driven by strong advertising growth and margin expansion [1][3]. - The report highlights a moderation in advertising revenue growth to 17% year-on-year, down from 22% in 2Q, attributed to softer GMV growth amid a challenging macro environment [3][4]. Summary by Sections Revenue and Profitability - Total revenue for 2024E is projected at RMB 125,348 million, reflecting a 2% decrease from previous estimates [7]. - Non-GAAP net profit for 2Q24 is expected to be RMB 4.2 billion, with a net margin of 14.1% [3][4]. Market Position and Growth - Kuaishou's GMV growth is anticipated to be 20% in 2024, with a significant focus on improving traffic monetization efforts [6][7]. - The company has consistently beaten consensus estimates on net profit by approximately RMB 500 million to 1 billion over the past ten quarters [3][5]. Advertising and E-commerce - Advertising revenue is projected to grow by 22% year-on-year, while e-commerce commission revenue is expected to see a growth of 21% year-on-year [3][4]. - The report notes a shift in the advertising mix, moving away from live streaming, which is expected to enhance margins [1][3]. Valuation Metrics - The report provides various valuation metrics, including a P/E ratio of 22.5 and an EV/EBITDA ratio of 14.3 for Kuaishou [2][4]. - The company's CROCI is noted at 45.9%, indicating strong returns on capital employed [2][4].