More bullish on margin improvement

Investment Rating - The report maintains a "BUY" rating for Kuaishou, with a target price of HK$97, implying an upside of 85.6% from the current price of HK$52.25 [2][3]. Core Insights - Kuaishou is expected to see margin improvement driven by gains in advertising and e-commerce. The company reported solid 4Q23 results, with revenue growth of 15% YoY and a net profit of RMB4.4 billion, which was 34% above consensus estimates [2][3]. - For FY24E, total revenue is projected to grow by 10.6% YoY, with specific segments showing varied performance: livestreaming revenue is expected to decline by 8%, while advertising and other services are forecasted to grow by 20% and 24% YoY, respectively [2][3]. - The adjusted net profit margin (NPM) improved to 13.4% in 4Q23, exceeding estimates, primarily due to a higher-than-expected gross profit margin (GPM) and reduced losses from overseas operations [2][3]. Financial Summary - Revenue for FY23A was RMB113.47 billion, with a YoY growth of 20.5%. For FY24E, revenue is expected to reach RMB125.54 billion, reflecting a growth of 10.6% [3][16]. - The adjusted net profit for FY23A was RMB10.27 billion, with projections for FY24E at RMB16.03 billion, indicating a significant growth of 56.1% YoY [3][16]. - The report highlights a projected GPM of 53.1% for FY24E, with an expected operating profit of RMB13.17 billion, marking a substantial recovery from previous losses [3][16]. Segment Performance - In 4Q23, the revenue breakdown showed online marketing services growing by 24% YoY, while live streaming remained flat at 0% growth. Other services and e-commerce saw significant growth of 36% and 31% YoY, respectively [2][7]. - For 1Q24E, advertising revenue is expected to increase by 26% YoY, while e-commerce GMV is projected to grow by 29% YoY, indicating strong momentum in these segments [2][3]. Valuation Metrics - The report provides a SOTP-based valuation, with the target price set at HK$97, based on a P/E ratio of 24x for FY24E and 17x for FY25E [2][3]. - The current market capitalization is reported at HK$2.27 billion, with a P/S ratio of 1.7 for FY24E, indicating a favorable valuation compared to historical performance [4][16].