20210730-招银国际-快手-W-01024.HK-Mixed_2Q21_with_competition___margin_pressures_4页_856kb

CMB International Securities | Equity Research | Company Update Summary

Core Overview

This report provides an equity research update on Kuaishou (1024 HK), focusing on its 2Q21E financial performance, business outlook, and investment implications. The analysis highlights the mixed results expected for the quarter, with revenue growth driven primarily by ads and e-commerce, while livestreaming performance remains weak. The stock price has declined significantly in July, and the company faces challenges such as user growth slowdown, margin pressure, and increased investment.

Key Financial Highlights

Revenue

• 2Q21E: Estimated at RMB18.7bn, up 46% YoY, 1% below consensus.
• Livestreaming: Revenue down 15% YoY (vs. -20% in 1Q21), reflecting continued weakness.
• Online Marketing Services: Revenue up 157% YoY, driven by rising eCPM and improved targeting.
• Other Services: Revenue up 156% YoY, with 616 performance showing strong growth in self-operation GMV and top broadcasters GMV.

Net Profit

• Non-GAAP net loss: Expected at RMB5.2bn, wider than consensus of RMB4.2bn.
• Adj. net profit: RMB-21.12bn in FY21E, RMB-15.68bn in FY22E, RMB-10.31bn in FY23E.

Earnings Per Share (EPS)

• Adj. EPS: RMB-4.78 in FY21E, RMB-3.55 in FY22E, RMB-2.33 in FY23E.
• Consensus EPS: RMB-6.25 in FY21E, RMB-0.22 in FY22E, RMB3.01 in FY23E.

Profit Margins

• Gross margin: 45.0% in FY21E, 46.7% in FY20A, 58.4% in consensus.
• Operating margin: -31.3% in FY21E, -19.6% in FY20A, 9.9% in consensus.
• Adj. net margin: -25.9% in FY21E, -24.1% in FY20A, 7.5% in consensus.

Market and Share Performance

• Stock price: Down 60% in July, reflecting soft user trend and margin pressure.
• Market cap: HK$466,769 million.
• Average 3-month turnover: HK$1,355.17 million.
• 52-week high/low: HK$417.8 / HK$105.0.
• Total issued shares: 3,394 million.

Shareholding Structure

• Tencent: 21.5%
• 5Y Capital: 16.6%
• DCM LP: 8.6%

Investment Outlook

• Target Price (TP): Adjusted to HK$145 from HK$382, implying 6.5x / 5x P/S for FY21E / FY22E.
• Rating: BUY (maintained), reflecting confidence in long-term growth despite short-term challenges.
• Up/Downside: +29.2% from current price HK$112.

Business Outlook

• Mixed 2Q21E results are anticipated due to competition, regulatory pressures, and traffic shift.
• Ads and e-commerce are expected to offset livestreaming weakness.
• MAU growth: Flat QoQ in 2Q21E, with -9% growth vs. +8% for Douyin.
• Breakeven year: Delayed from FY22E to later due to increased costs and lower GPM.

Financial Projections

Key Concerns

• User share loss to Douyin.
• Margin dilution due to heavier investment in content and overseas expansion.
• Regulatory tightening affecting livestreaming and traffic shift to e-commerce.

Ratios and Metrics

Strategic Adjustments

• Trimmed topline forecasts by 5% / 11% / 15% for FY21/22/22E.
• Lower financial estimates and higher multiple discount due to sector de-rating.

Analyst Notes

• Maintain BUY rating.
• Auditor: PwC.
• Related Reports:
  • 2Q21E rev to accelerate with better margin (25 May 2021)
  • Solid 4Q20; Expecting strong users in 1Q21E (24 Mar 2021)

Disclaimer

• The report is for informational purposes only and not investment advice.
• Past performance is not indicative of future results.
• Risks are involved in trading securities, and actual outcomes may vary.
• CMBIS is not liable for any loss or damage arising from reliance on the report.
• The report is not an offer or solicitation to buy or sell any security.
• It is intended for specific investors only, and distribution is restricted accordingly.

Summary

Kuaishou faces mixed results in 2Q21E, with ads and e-commerce showing strong growth while livestreaming remains weak. The company's user growth has slowed, and it has lost market share to Douyin. Despite these challenges, ads and e-commerce are expected to offset the livestreaming weakness. Margins are under pressure due to increased investment and regulatory headwinds. The target price has been reduced to HK$145, reflecting lower financial estimates and higher discounting. The BUY rating is maintained, with confidence in long-term growth. The report includes key financial metrics, ratios, and market performance data, while emphasizing the risks and uncertainties in the equity market.