20220525-招银国际-快手-W-01024.HK-Moving_into_2H22E_recovery_4页_849kb

Kuaishou (1024 HK) Company Update Summary

Core Content

Kuaishou reported strong 1Q22 results, exceeding expectations in both revenue and non-GAAP net loss. The company demonstrated resilience in its core business segments, particularly in ads and e-commerce, which showed robust growth. Despite short-term challenges from the resurgence of the epidemic in 2Q22E, the report suggests that these headwinds have been largely priced in, and the company is expected to recover in the second half of 2022.

Main Points

• 1Q22 Performance:

  • Revenue increased by 24% YoY, beating consensus by 2%.
  • Non-GAAP net loss was -RMB3.7bn, better than the consensus of -RMB4.5bn.
  • Ads revenue grew 33% YoY, driven by increased advertiser numbers and strong e-commerce ads.
  • E-commerce GMV rose 48% YoY, supported by higher repeat purchase rates and growth in active merchants.
  • Live streaming revenue grew 8% YoY, above industry average, due to rising MPUs.

• 2Q22E Forecast:

  • Revenue is expected to grow 8% YoY, slightly lower than the previous forecast of 10%.
  • E-commerce GMV is projected to grow 23% YoY with a take rate of 1%.
  • Ads revenue is forecast to grow 7% YoY, impacted by logistics and macroeconomic factors.
  • Live streaming is expected to grow 11% YoY, with improved adjusted net profit margin (adj. NPM) due to better GPM and operational cost control.

• Long-Term Outlook:

  • The report suggests that the company will benefit from long-term growth, share gains, and narrowing losses.
  • The analyst maintains a BUY rating and keeps the target price at HK$120.

• Financial Highlights:

  • Revenue is projected to grow from RMB58,776mn (FY20A) to RMB127,311mn (FY24E), with a CAGR of 15.6%.
  • Gross margin is expected to increase from 43.1% (FY20A) to 48.6% (FY24E).
  • Adj. net margin is projected to improve from -13.3% (FY20A) to 2.4% (FY24E).
  • Operating margin is expected to improve from -24.1% (FY20A) to -4.5% (FY24E).

• Earnings Summary:

  • FY22E revenue is estimated at RMB92,761mn, with a slight revision of -1% to -2% compared to previous estimates.
  • Adj. net profit is expected to be -RMB9,504mn (FY22E), -RMB4,207mn (FY23E), and +RMB3,085mn (FY24E).
  • Adj. EPS is forecast to be -RMB2.1, -RMB0.9, and +RMB0.7 for FY22E, FY23E, and FY24E, respectively.

• Key Ratios:

  • Sales mix: Live streaming accounts for 34.8% (FY22E), online marketing services for 54.6%, and other services for 10.7%.
  • Revenue growth rate: 14.4% (FY22E), 18.7% (FY23E), and 15.6% (FY24E).
  • Gross profit margin: Expected to rise from 43.1% (FY20A) to 48.6% (FY24E).
  • Operating margin: Expected to improve from -24.1% (FY20A) to -4.5% (FY24E).
  • Adj. net margin: Expected to rise from -13.3% (FY20A) to 2.4% (FY24E).

Key Information

• Stock Performance:

  • Current price: HK$63.3
  • Target price: HK$120 (up/downside: +89.6%)
  • Market capitalization: HK$296,557mn
  • 52-week high/low: HK$235.6/HK$53.15

• Shareholding Structure:

  • Tencent: 20.8%
  • 5Y Capital: 16.1%
  • DCM LP: 7.9%

• Auditor: PwC

• Related Reports:

  • Share gain continued, despite epidemic pressure (13 May 2022)
  • Expecting a solid start in FY22E (30 Mar 2022)
  • Resilient growth with narrowing loss ahead (17 Jan 2022)

• CMBIGM Ratings:

  • BUY: Potential return of over 15% over next 12 months
  • OUTPERFORM: Industry expected to outperform the relevant broad market benchmark

Conclusion

Kuaishou showed strong performance in the first quarter of 2022, with its core businesses continuing to grow. While there may be short-term challenges in 2Q22E, the long-term outlook remains positive, with the potential for improved margins and increased profitability. The report maintains a BUY rating with a target price of HK$120, suggesting that the stock has significant upside potential.