4Q revenue increased 15% year over year, and adjusted net profit exceeded expectations
Kuaishou 4Q's revenue increased 15% year over year to 32.6 billion, in line with Bloomberg's unanimous expectations. By business, live streaming, advertising, e-commerce, and other revenues changed 0.1%, 21%, and 36%, respectively, year over year. On the profit side, gross margin improved 6.7pct year over year to 53.1%, and adjusted net profit reached 4.4 billion, compared with Bloomberg's agreed estimate of 3.4 billion yuan. We raised our 24-25 adjusted net profit forecast to $184/22.7 billion, compared with the previous value of $156/211 billion, and introduced a new value of $26.7 billion for 26 years. We adjusted our target price from HK$84.45 to HK$85.06 based on the SOTP valuation to maintain the buy rating.
Looking forward to the future: The commission rate has stabilized in 24, and the frequency of purchases is still an important gripper. In 24, we expect Kuaishou DAU to grow 8% year-on-year to 4.1 billion, maintain a 12% growth rate in total revenue, and reach 18.4 billion yuan in adjusted net profit (the share of three fees continues to decline). We expect the e-commerce commission rate to stabilize in '24. The company's GMV will increase 25% year over year. The main drivers are average daily sales users, purchasing frequency, and pan-shelf e-commerce. We expect advertising revenue to increase 21% year over year in '24 (eCPM improvement), search ads and shelf e-commerce to release more ad inventory, and accelerate brand entry to increase advertising ARPU.
The e-commerce pan-shelf business progressed rapidly. Brand GMV increased 155% year-on-year, 4Q Kuaishou's other revenue increased 36% year over year. Among them, e-commerce GMV increased 29.3% year on year, and Pan-shelf GMV increased 145% year on year (corresponding share of over 20%). Kuaishou optimizes shopping scenarios and adds e-commerce activity models, while also implementing service centers and product selection centers to help merchants grow. During the promotion period, the mall function was fully opened, and the GMV of all platform brands increased by 155% year-on-year. The year-on-year growth rate of the average number of sellers and buyers per day in 4Q was over 60%, and the penetration rate of monthly active purchasers continued to increase. In addition, the company introduced e-commerce black card memberships for leading users on the basis of Kuaishou and small store annual cards to increase the frequency of purchases.
Advertising business: The recovery trend of external circulation is obvious. AIGC improvements increased marketing ROI4Q advertising revenue by 20.6% year on year, and the year-on-year growth rate of external circulation continued to increase compared to 3Q; the ad load rate also improved markedly to 9%, and eCPM reached 16-18 yuan. 4Q brand advertising revenue increased by more than 80% month-on-month, and industries such as FMCG performed well; the increase in the brand occupancy rate also brought improvements in Kuaishou advertising ARPU (title live streaming, big promotion, etc.). In terms of product capabilities, Kuaishou has also launched fully automated advertising products for leads. At the same time, it uses AIGC to improve marketing material production efficiency and ROI, and provide customers with intelligent targeted marketing and delivery capabilities.
Risk warning: Ad load rates, live e-commerce, and shelf e-commerce growth rates are lower than expected.