20210826-招银国际-快手-W-01024.HK-Cautious_on_2H21E_momentum_4页_847kb

Kuaishou (1024 HK) Company Update Summary

Core Content Overview

This report provides an analysis of Kuaishou's financial performance and future outlook for the second quarter of 2021 (2Q21) and beyond. It highlights both positive and negative trends in revenue, user metrics, and margin performance, along with the company's guidance and market implications.

Key Financial Performance in 2Q21

• Revenue: Increased by 49% YoY, 2% above consensus, driven by strong growth in online marketing services (+156% YoY) and e-commerce (+213% YoY), though live streaming revenue declined by 14% YoY.
• Non-GAAP Net Loss: Improved to RMB4.8bn, better than consensus of RMB4.9bn and RMB5.2bn.
• User Metrics: MAU declined by 3% QoQ, DAU by 1% QoY, but time spent per DAU increased by 7.5% QoQ.
• Market Guidance: Management indicated MAU will grow sequentially in July and August, with the full-year target unchanged (mid-teens YoY growth), but user expansion concerns remain due to lower ROI and competition with Douyin.

Outlook for 2H21E

• Revenue Growth Deceleration: Expected to slow to 30% YoY in 3Q21E, with:
  • Live streaming: +1% YoY
  • Ads: +70% YoY
  • E-commerce: +35% YoY
• Monetization Challenges: Ads face soft demand from education and gaming sectors due to tightening regulations and macroeconomic uncertainty.
• E-commerce GMV Guidance: Reduced to RMB650bn for FY21E due to intensified competition and soft consumption.
• Margin Pressure: eCPM is expected to decline in 2H21E, and net loss is projected to widen. Adj. NPM is forecasted at -35% in 3Q21E, with GPM at 40% and S&M ratio at 60%.

Investment Recommendation

• Rating: BUY (Maintained)
• Target Price: HK$110 (Down from HK$145)
• Up/Downside: +41.9% from current price of HK$77.5
• Reasoning: Despite revenue growth slowdown and margin pressures, the company is still viewed as having potential for positive returns in the medium term.

Financial Summary Highlights

Shareholding and Stock Performance

• Shareholding Structure:
  • Tencent: 21.5%
  • 5Y Capital: 16.6%
  • DCM LP: 8.6%
• Stock Performance (12-month):
  • Absolute: -80.5%
  • Relative: -76.2%

Market and Regulatory Factors

• Market Correction: May cause temporary stock price pressure.
• Regulatory Tightening: Affects ads and e-commerce performance.
• Macroeconomic Uncertainty: Contributes to weaker monetization and lower margins.

Key Ratios and Performance Metrics

• Sales Mix:
  • Live Streaming: 36.9% (FY21E)
  • Online Marketing Services: 54.6% (FY21E)
  • Other Services: 8.5% (FY21E)
• Gross Margin: 44.6% (FY21E)
• Operating Margin: -40.6% (FY21E)
• Adj. Net Margin: -31.1% (FY21E)
• P/S Ratio: 3.3 (FY21E)

Analyst Disclosures

• The report is prepared by CMB International Securities Limited (CMBIS).
• Auditor: PwC
• Analyst Certification: Confirms no conflicts of interest and no trading in the stock within 30 days prior to the report.
• Disclosure: CMBIS has an investment banking relationship with the companies covered in the report.

CMBIS Ratings

• BUY: Potential return of over 15% in 12 months.
• HOLD: Potential return of +15% to -10% in 12 months.
• OUTPERFORM: Industry expected to outperform the market.
• MARKET-PERFORM: Industry expected to perform in-line with the market.

Disclaimer

• The report is not investment advice and is based on publicly available data.
• Past performance does not guarantee future results.
• Investors are advised to consult a professional financial advisor for their own decisions.
• No liability is accepted for any loss or damage resulting from reliance on the report.

Conclusion

Kuaishou's 2Q21 performance showed mixed results, with strong revenue growth but weaker user metrics. The company faces challenges in monetization and margin trends in the second half of 2021, primarily due to regulatory pressures and economic uncertainty. Despite these concerns, the BUY rating remains in place, indicating positive long-term potential, though short-term stock price pressures are expected.