KUAISHOU(01024) 华创证券·2024-04-07 16:00Investment Rating - The report gives a "Recommend" rating for Kuaishou-W (01024.HK) with a target price of HKD 62.92, compared to the current price of HKD 49.65 [1] Core Views - Kuaishou has entered a new chapter of comprehensive profitability, with its advertising and other businesses growing rapidly while the once-pillar live streaming business is shrinking, expected to continue declining in the future [1] - The competitive landscape has eased, with Kuaishou repeatedly validating the advantages of its traffic genes in competition with Douyin and WeChat Video Accounts [1] - Kuaishou's two major businesses, advertising and e-commerce, have differentiated paths and entered a stable growth track, with future emphasis on synergistic development [1] Business Overview - Kuaishou's main revenue structure consists of live streaming, advertising, and e-commerce. The live streaming business, once the main revenue contributor, is gradually shrinking due to regulatory and strategic adjustments, while advertising and e-commerce are growing [11] - Advertising revenue is driven by internal circulation, closely linked to e-commerce GMV, while e-commerce focuses on strengthening the linkage between content and shelf fields to improve MAC penetration [11] - The company's revenue structure reflects its exploration and adjustment of commercialization, with advertising as the mainstay and e-commerce still in the growth phase [11] Financial Performance - Kuaishou achieved its first full-year profit in 2023 since its IPO, with adjusted net profit reaching RMB 10.27 billion [15] - The company's gross margin, net margin, and adjusted net margin have been steadily increasing since Q1 2022, reaching 53.1%, 11.1%, and 13.4% respectively in Q4 2023 [16] - Sales expenses have decreased significantly, with sales/ R&D/ management expense ratios dropping to 31%/10%/2% in Q4 2023, down 3.1/2.1/1.3 percentage points year-on-year [17] Competitive Landscape - The competitive landscape has eased, with the MAU gap between Kuaishou and Douyin remaining stable and user overlap decreasing, indicating a more relaxed competitive environment [22] - WeChat Video Accounts, while showing strong growth, are unlikely to disrupt the top 2 positions of Douyin and Kuaishou in the short term due to differences in user profiles and industry growth slowing down [22] - Kuaishou has repeatedly validated its traffic gene advantages in competition, gradually emphasizing the concept of "public domain traffic + private domain operation repurchase" [22] Advertising Business - Kuaishou's advertising business is divided into external and internal circulation. Internal circulation advertising, which accounts for nearly half of advertising revenue, is closely linked to e-commerce GMV and is expected to continue deepening its synergy with e-commerce [48] - External circulation advertising is more influenced by macro factors and advertiser spending willingness, with strategies focusing on increasing ad load and eCPM for long-term revenue growth [50] E-commerce Business - Kuaishou's e-commerce business, recorded under "other services," achieved a GMV of RMB 1.18 trillion in 2023, a 31% year-on-year increase, with a stable commission monetization rate of around 1.19% [53] - The e-commerce strategy focuses on three key areas: public domain traffic, general shelves, and small and medium-sized brands, aiming to build a "trust e-commerce" model through content and shelf integration [56] - Kuaishou's e-commerce business is expected to be the main driver of growth in 2024-2026, with GMV growth rates of 25%/22%/15% and other service revenue growth rates of 28%/22%/15% [63] Valuation and Forecast - The report forecasts Kuaishou's revenue for 2024-2026 to be RMB 127.8/143.2/153.8 billion, with year-on-year growth of 12%/12%/7%, and adjusted net profit of RMB 16.1/21.4/25.5 billion, with year-on-year growth of 57%/33%/19% [62] - Using the SOTP valuation method, the target market value for 2024 is HKD 273.3 billion, corresponding to a target price of HKD 62.92, with a PE ratio of 12/9/8 times for 2024-2026 [62]