Key points of investment
The company's performance exceeded expectations: 2023Q4's main business revenue reached 32.561 billion yuan, yoy +15.1%, in line with Bloomberg's agreed expectations; gross profit margin of 53.1%, exceeding Bloomberg's agreed expectations of 51.4%; adjusted net profit of 4.36 billion yuan, exceeding Bloomberg's agreed forecast of 3.26 billion yuan.
MAU is at a new high, the length of time is stable, and the short drama business is rich in content ecosystem. 2023Q4's MAU reached 700 million, up 9.4% year on year, reaching a record high; DAU reached 383 million, up 4.5% year over year; DAU ratio reached 54.6%; DAU single user time was 124.5 minutes. The increase in the number of users mainly benefits from the company's optimization strategy for user growth, scenario construction with insight into user needs, exploration of user interests by algorithms, and further enrichment of the content ecosystem. The content takes skits as an example. By the end of 2023, Kuaishou Starlight Skits had launched a total of nearly 1,000 skits, of which over 300 hundred million hit skits had been broadcast. In 23Q4, the number of users who watched more than 10 episodes of skits every day reached 94 million, an increase of more than 50% over the previous year, and the number of daily paying users of Kuaishou skits increased more than 3 times over the same period last year. The search business progressed steadily. In 23Q4, the average number of users using Kuaishou search increased by more than 16% year over year, the average number of daily searches continued to increase year over year, and search marketing service revenue increased nearly 100% year over year.
The MAC of live e-commerce reached a new high, and the strong growth of GMV is driving the growth of e-commerce and advertising revenue.
2023Q4 Kuaishou e-commerce's GMV increased 29% year over year to 403.9 billion yuan. MAC reached a new high, surpassing 130 million, and MAU penetration rate increased to 18.6%. This is mainly due to the continuous enrichment of shopping scenarios such as Pan-Shelf and product gameplay upgrades. Pan-Shelf GMV 23Q4 accounts for more than 20% of the total GMV, and we expect to continue to provide the company with GMV increments in the future. Relying on e-commerce GMV growth, 2023Q4's other revenue, including e-commerce revenue, increased 36% year over year to 4.3 billion yuan.
Revenue from online marketing services increased 21% year over year to 18.2 billion yuan, mainly driven by internal circulation advertising; external circulation advertising continued to recover, and the year-on-year revenue growth rate continued to increase compared to 2023Q3. In particular, it performed well in media information (including skits), education, training, and gaming industries. The revenue from the live streaming business was 10 billion yuan, the same as the previous year, but due to the governance of the live streaming ecosystem, we expect the 2024Q1 live streaming business revenue to drop 8% year on year.
Profits were better than expected, and we look forward to continuing to release profits for 24 years. 2023Q4's gross margin reached 53.1%, mainly due to the increase in the share of revenue from high-margin businesses such as advertising and e-commerce, effective control of share costs, and a decrease in unit server bandwidth costs. The company expects a further increase in gross margin over the same period last year. Adjusted net profit of 4.36 billion yuan exceeded Bloomberg's unanimous expectations, and profit was released steadily.
Profit forecasting and investment ratings: We are optimistic about the company's unique community culture, the acceleration of e-commerce commercialization, and the continued release of profits. We raised the company's adjusted net profit for 2024-2025 from 151.21 billion yuan to 162/22.8 billion yuan, adding a forecast of 29 billion yuan for 2026, corresponding to the adjusted PE for 2024-2026 at 13/9/7x, maintaining a “buy” rating.
Risk warning: market competition risk, risk of commercialization falling short of expectations, risk of international situation.