Matters: On March 20, 2024, Kuaishou announced its annual results for 23Q4 and 2023. Total revenue for 23Q4 was $32.6 billion, yoy +15.1%; net profit of 3.6 billion yuan, turning a year-on-year loss into a profit; and an adjusted net profit of 4.4 billion yuan, turning a year-on-year loss into a profit.
The user ecosystem continues to prosper, with MAU breaking 700 million. From the user side, Q4 DAU is 382.5 million, yoy +4.5%, qoq -1.1%, mainly due to normal seasonal factors; MAU is 700.4 million, yoy +9.4%, qoq +2.3%; the average daily DAU length remains 124.5 minutes, and continuous optimization through algorithms, including diversified high-quality content supply represented by short dramas, maintains high user stickiness. While the number of users continues to grow, the cost of new customer acquisition per unit was further optimized year-on-year, and ROI continued to increase.
23Q4 revenue was in line with expectations, driven by high growth in online marketing+e-commerce business. 23Q4, 1) Online marketing service revenue was 18.2 billion yuan, yoy +20.6%, thanks to the company's refined operation, intelligent marketing product upgrades, and continuous algorithm optimization. Among them, internal circulation advertising is the main growth driver. The year-on-year growth rate of external circulation effect advertising revenue increased compared to 23Q3, and the media, education, training, and game industries continued to grow. 2) Q4 is the traditional e-commerce peak season. E-commerce revenue grew strongly, yoy +40%, GMV reached 403.9 billion, yoy +29.3%. The growth rate of e-commerce revenue is higher than that of GMV, mainly due to incremental revenue driven by talent distribution commissions. 3) Live streaming revenue is 10 billion yuan, yoy +0.1%, and the live streaming business is expected to enter steady development.
23Q4 profit exceeded expectations, increased gross margins+improved costs for two-wheel drive. In 23Q4, the company achieved a gross profit margin of 53.1%, yoy+7.6pct, qoq+1.4pct, mainly due to 1) the increase in revenue share of online marketing+e-commerce business with strong profitability; 2) continuous optimization of technology improved the efficiency of bandwidth and server usage.
On the cost side, the sales expense ratio was 31.3%, yoy-3.1 pct, qoq-0.7 pct. The absolute value of sales expenses increased slightly from month to month. Mainly, Q4 was the peak marketing season. Management cost rate 2.3%, yoy-1.3pct, qoq-0.9pct; R&D cost rate 10.1%, yoy-2.1pct, qoq-0.5pct. Driven by a two-wheel drive of increased gross margin and improved expense ratio, the company's net profit was 3.6 billion yuan, with a net profit margin of 11.1%; adjusted net profit of 4.4 billion yuan, with an adjusted net interest rate of 13.4%, and the profit side exceeded expectations.
Overseas revenue grew rapidly, and losses continued to narrow. By segment, in 23Q4, domestic revenue was 31.7 billion yuan, yoy +13.2%; overseas revenue was 850 million yuan, yoy +197.5%, of which overseas online marketing revenue was over 300%. Domestic operating profit was 4.3 billion yuan, yoy +13.2%; overseas operating loss was 550 million yuan. 22Q4 was an operating loss of 1.5 billion yuan. Losses narrowed sharply year-on-year, mainly due to rapid growth in overseas revenue combined with more effective control of marketing expenses. In 23Q4, the company continued to focus on the core market. DAU and user time in key regions such as Brazil and Indonesia increased steadily year-on-year, and continued to promote the localized original content ecosystem.
Investment advice: The commercialization process of the company continues to advance, and profit releases continue to exceed expectations. We expect the company's non-IFRS net profit for 2024/2025/2026 to be 16.5 billion yuan/23 billion yuan/28.8 billion yuan, respectively; net profit to mother will be 12.7 billion yuan/19 billion yuan/24.7 billion yuan respectively. Based on the stock price on March 21, 2024, the corresponding PE is 16X/11X/8X, respectively. Maintain a “Recommended” rating.
Risk warning: The intention to launch phased advertising has declined; policy regulations have become stricter; industry competition has intensified.