Revenue increased 15% year over year, and adjusted profit margin increased 14 pct year over year. In 23Q4, the company's revenue was 32.6 billion yuan, +15% year-on-year. The gross profit margin was 53.1%, +7.6pct year over year. Looking at the breakdown, the ratio of bandwidth expenses to revenue decreased by 1.9 pct year on year, and revenue and share as a share of revenue decreased by 5.5 pcts.
We expect the company's gross margin to be optimized in 2024, which can reach more than 53%. The absolute value of 23Q4's sales expenses was 10.2 billion yuan, +5% over the same period last year. The sales rate was 31%, a year-on-year decrease of 3 pct.
We expect the company's 24-year sales expenses to remain stable, with a sales rate of 31%. 23Q4 Company's adjusted net profit was 4.36 billion yuan, with an adjusted profit margin of 13.4%, up 14 pcts year on year and 2 pcts month on month. By region: 1) Domestic revenue of 31.7 billion yuan, up 13% year on year; domestic operating profit of 4.25 billion yuan, operating profit margin of 13.4%; 2) loss of 550 million yuan from overseas operations.
Operations: 23Q4 total traffic -3% YoY; 24H2 DAU is expected to reach 400 million. In 23Q4, Kuaishou's total MAU was 70 million, +9% year over year and +2% month over month. DAU 383 million, +4% YoY, -1% month-on-month, and 55% DAU/MAU. The average daily time for Kuaishou this quarter was 124.5 minutes, -7% year over year. Based on the DAux time, the total flow rate for 23Q4 Kuaishou was -3% year-on-year and -5% month-on-month. According to the company's results conference, it is expected that DAU will continue to grow throughout 2024 and achieve an average DAU of 400 million in a single quarter in the second half of the year. At the same time, there was no significant increase in total user growth and retention costs compared to 2023.
Commercialization: E-commerce GMV is expected to grow 25% in '24, and advertising revenue will increase 20% + year over year. 1) Live e-commerce 23Q4, revenue from other businesses (mainly live e-commerce) was 4.3 billion yuan, +36% year over year and +22% month over month. GMV4039 billion yuan, +29% YoY, +39% month-on-month. The monetization rate was 1.07%, up 0.05pct year over year. Currently, the core driver of the company's e-commerce business is the increase in the number of paying users. The average number of buyers in 23Q4 was close to 130 million, and the monthly active user penetration rate increased to 18.6%. 2) Advertising: In 23Q4, advertising revenue was 18.2 billion yuan, +21% year-on-year and +24% month-on-month. Among them, the year-on-year growth rate of external circulation effect advertisements continued to increase, achieving double-digit growth, and running well in the media information, education, training, and game industries. We expect the company's advertising revenue to grow 20% + year over year in 2024, driven by internal and external recurring advertising. 3) Live streaming: In 23Q4, live streaming revenue was 10.1 billion yuan, +0.1% year-on-year and +3% month-on-month.
The company is rectifying the live streaming ecosystem. We expect live streaming revenue to be -8% year-on-year in '24.
Investment advice: It is expected that the revenue side will grow steadily in 24 years, and the profit side will continue to be released. Considering the company's excellent cost control, we expect adjusted profit of 165/235/28 billion yuan for 24-26 (+8%/+1%/-% increase). Maintain the target price of HK$70-93 and continue to maintain the “buy” rating.