20211125-招银国际-快手-W-01024.HK-Focusing_on_improving_efficiency_5页_853kb

CMB International Securities | Equity Research | Company Update Summary

Core Content and Key Points

Kuaishou (1024 HK) reported strong 3Q21 results, surpassing expectations with a 33% YoY revenue growth. The company's performance was driven by seasonal factors such as the summer holiday and the Olympics, along with improved user acquisition efficiency following organizational restructuring. Key highlights include:

• User Metrics: DAU and MAU increased by 18.5% and 19.6% YoY, respectively, with higher user engagement and time spent.
• Revenue Breakdown:
  • Live streaming revenue declined by 3% YoY, but remained stable compared to CMBIS estimates.
  • Online marketing services grew by 76% YoY, significantly outperforming the estimate.
  • E-commerce revenue increased by 53% YoY, exceeding the forecast.
• Net Loss: Non-GAAP net loss was RMB4.8bn, better than the consensus estimate of RMB6.5bn.
• Valuation: The target price (TP) is maintained at HK$136, implying a 5x FY22E P/S multiple. The valuation at 3.6x FY22E P/S is considered attractive.
• Efficiency Focus: Management emphasized efficiency improvement in FY22E due to macroeconomic challenges. Adjusted net profit margin is expected to improve, with lower S&M/rev ratio offsetting the impact of lower gross profit margin (GPM).

Financial Highlights

Revenue Growth

• FY19A: RMB39,120 million
• FY20A: RMB58,776 million (+50.2% YoY)
• FY21E: RMB79,508 million (+35.3% YoY)
• FY22E: RMB98,169 million (+23.5% YoY)
• FY23E: RMB119,559 million (+21.8% YoY)

Adjusted Net Profit

• FY19A: RMB1,034 million
• FY20A: RMB(7,949) million
• FY21E: RMB(20,890) million
• FY22E: RMB(17,526) million
• FY23E: RMB(12,146) million

P/S Ratio

• FY19A: 9.1x
• FY20A: 6.0x
• FY21E: 4.5x
• FY22E: 3.6x
• FY23E: 3.0x

Revenue Forecast Adjustments

• CMBIS reduced FY21-23E revenue forecasts by 1%-12% to reflect a more cautious outlook on advertising revenue amid macroeconomic challenges.
• The company is expected to narrow its net loss, aligning with its efficiency focus.

Business Performance

• Live Streaming: Revenue is expected to remain flat in 4Q21E, but long-term growth is anticipated.
• Advertising: Expected to grow by 50% YoY in 4Q21E, with a moderate take rate trend in FY22E.
• E-commerce: Achieved strong growth in 3Q21, with GMV up 86% YoY and revenue up 53% YoY. The company's performance during "11.11" was solid, with brand GMV contributing ~10% of total GMV.
• Long-Term Goals: Kuaishou aims for a full-year GMV of RMB2tn in the long run, with FY21E GMV at RMB650bn.

Shareholding and Stock Performance

• Shareholding Structure:

  • Tencent: 21.3%
  • 5Y Capital: 16.5%
  • DCM LP: 8.6%

• Stock Performance:

  • 1-month: -8.4%
  • 3-month: +37.6%
  • 6-month: -60.9%
  • 12-month: Price performance chart is provided.

Financial Summary

Income Statement Highlights

• Revenue growth: 92.7% in FY19A, 50.2% in FY20A, 35.3% in FY21E, 23.5% in FY22E, 21.8% in FY23E.
• Gross profit: RMB32,997 million in FY21E, with a gross margin of 41.5%.
• Operating profit: Negative in all years, with the highest in FY19A at RMB689 million.
• Adj. net profit: Negative in all years, with the smallest loss in FY23E at RMB(12,146) million.
• Adj. net margin: Improved from -26.3% in FY21E to -10.2% in FY23E.

Balance Sheet Highlights

• Cash increased from RMB3,996 million in FY19A to RMB41,830 million in FY21E.
• Non-current liabilities remained stable at RMB189,012 million.

Cash Flow Summary

• Operating cash flow: Positive in FY19A and FY20A, but negative in FY21E and FY22E.
• Capital expenditures: RMB(2,548) million in FY19A to RMB(6,206) million in FY22E.
• Net change in cash: Positive in FY21E, but negative in FY22E and FY23E.

Valuation and Recommendations

• Target Price: HK$136, unchanged from previous, implying a 5x FY22E P/S.
• CMBIS Rating: BUY, based on the company's ability to narrow net loss and improve efficiency.
• SOTP Valuation: The total equity value is estimated at HK$494,288 million, based on individual business valuations.

Analyst Disclosures

• The analyst certifies that the views expressed in the report reflect their personal views and that there are no conflicts of interest.
• CMBIS has an investment banking relationship with the companies covered in the report.
• The report is intended for distribution solely to major US institutional investors and may not be shared with others.

Conclusion

Kuaishou demonstrated strong performance in 3Q21, with improved user metrics and financial results. Despite macroeconomic headwinds, the company is focused on enhancing efficiency, which is expected to lead to narrower net losses. The current valuation is seen as attractive, and the BUY rating is maintained. The report provides detailed financial forecasts, including revenue, profit, and margin trends, along with a comprehensive SOTP valuation model.