20230131-招银国际-快手-W-01024.HK-Solid_4Q22E_with_better_margin_outlook_9页_1mb

Kuaishou (1024 HK) Company Update Summary

Core Content and Key Highlights

• Company Overview: Kuaishou is a major player in China's internet sector, with a focus on online marketing, livestreaming, and other services. The report highlights its performance and future outlook for 4Q22E and FY23E.
• 4Q22E Performance: Kuaishou is expected to deliver a solid 4Q22E with revenue growth of +11% YoY, and a narrowing net loss to RMB247mn (vs. prior estimate of -RMB348mn).
• Margin Outlook: Improved margin expectations are attributed to better cost control, algorithm optimization, and narrowing overseas losses. The adjusted net profit is forecasted at -RMB247mn.
• Target Price (TP): The target price is lifted to HK$94, reflecting a higher multiple due to sector re-rating and improved earnings forecasts.
• Stock Performance: The stock has shown mixed performance over different time frames, with a 121.6% 3-month return and a 12-month price performance chart included.
• Shareholding Structure: Tencent holds the largest stake at 20.5%, followed by Morningside Venture Cap at 15.8% and Employee Shareholding Plan at 6.8%.

Main Points and Key Information

Revenue and Growth

• Revenue Forecast:
  • FY22E: RMB93,006 million
  • FY23E: RMB106,317 million
  • FY24E: RMB120,109 million
• YoY Growth:
  • FY22E: +14.7%
  • FY23E: +14.3%
  • FY24E: +13.0%
• 4Q22E Revenue: RMB27,116 million (+11% YoY, +17.2% QoQ)
• 4Q22E Revenue Breakdown:
  • Online Marketing: RMB14,531 million (+10% YoY)
  • Live Streaming: RMB9,454 million (+7% YoY)
  • Other Services: RMB3,131 million (+32% YoY)

User Metrics

• DAU: 365 million in 4Q22E (+0.5% QoQ)
• Daily Time Spent per DAU: Stabilized at around 130 minutes

Business Segments

• Online Marketing: Expected to gain market share due to vertical penetration and customized solutions.
• Live Streaming: Stronger momentum with efficient operation and deep cooperation with agencies and KOLs.
• Ecommerce: GMV is expected to grow by +31% YoY, but take rate may be affected by higher returns due to logistics disruptions.

Financial Margins

• Gross Margin: Forecasted at 45.8% for 4Q22E
• S&M Ratio: Expected to improve by 3ppts QoQ to 36%
• Adj. Net Margin: Forecasted at -0.9% for 4Q22E

Outlook and Strategy

• Ecommerce Recovery: Anticipated to benefit from logistics recovery and improved consumption sentiment in 2H23E.
• Ads Recovery: Expected to rebound in 2Q23E with rising demand post-reopening, supported by macroeconomic recovery and offline business revival.
• Cost Discipline: Continued cost control in FY23E, with domestic business operating leverage and narrowing overseas losses expected to lead to group breakeven.

Valuation and Market Comparison

SOTP Valuation

• Live Streaming: EV/Sales at 1.0x, valued at RMB35,504 million
• Advertising: EV/Sales at 2.0x, valued at RMB116,132 million
• Ecommerce: P/GMV at 0.16x, valued at RMB180,210 million
• Enterprise Value: RMB331,845 million
• Equity Value: RMB360,513 million
• TP Implied Multiple: 3.3x FY23E P/S, slightly above the industry average of 2.9x

Industry Comparison

• P/S Multiple:
  • Kuaishou: 2.9x (FY23E)
  • Average for Core Internet: 2.9x
  • Average for Entertainment: 3.2x
• P/E Multiple:
  • Kuaishou: 54x (FY24E)
  • Average for Core Internet: 3.2x
  • Average for Entertainment: 3.2x

Conclusion

• Investment Recommendation: Maintain BUY
• Reasoning: Kuaishou is expected to achieve better revenue growth and margin improvement, supported by strong seasonality, algorithm optimization, and effective cost control. Its TP is lifted to HK$94, reflecting a more optimistic outlook and improved valuation multiples.