Reshape the perspective and look at Kuaishou: changes in the main revenue structure, opening a new chapter in large-scale profits. The platform's overall commercialization strategy is in line with market restructuring, and advertising and other businesses are growing rapidly. The former pillar business of live streaming has shrunk, and its share is expected to continue to decline in the future. Advertising/livestreaming/other businesses accounted for 53%/34%/12% of revenue in 23, respectively, and revenue growth was driven by other businesses and advertising. In terms of business drivers:
Advertising enhances internal circulation, and e-commerce strengthens the linkage between global content markets and shelves, and increases MAC penetration.
The company's profit maturity increased, and it entered the fast track of steadily releasing high-growth profits quarterly, and achieved the first full-year profit since listing in '23. As management adjusts and goes to battle lightly, the company's strategic plan will become more and more clear, which may enhance its own alpha+ and bring about the possibility of valuation repair.
Judging the easing of the competitive landscape, Kuaishou repeatedly verified the advantages of traffic genes in competition. Looking back at Kuaishou's two traffic competitions between Douyin and video accounts, we believe that video numbers will not shake the top 2 pattern in the short video industry in the short term. The competitive pattern of Doukuai has eased, and the MAU margin has basically been maintained + user engagement has declined. At the same time, Kuaishou's sales expenses have fallen back to a stable range, which means that Kuaishou's anxiety defense has officially come to an end, and instead focus on practicing internal skills and seeking development in the stock market. Today, the user penetration rate of short video platforms may have basically peaked, and the industry's growth rate is slowing down. Judging the video account user profile is different from Kuaishou. Judging the entry of video accounts is not expected to cause intense traffic grabbing and the competitive landscape to deteriorate. Looking back over the past 5 years, Kuaishou has repeatedly verified the private domain advantage brought by traffic genes in competition, and gradually emphasized the global business philosophy, forming a two-wheel drive of “public domain traffic support+private domain operation and repurchase”.
Kuaishou's two carriages — advertising and e-commerce — have successfully completed the path of differentiation, and the commercialization process has entered a steady growth path. In the future, more emphasis will be placed on collaborative development. Looking at the industry side, although the growth rate of internet advertising and live e-commerce declined compared to the early stages of development, they are still sending growth signals. [Read the advertisement first]. Kuaishou's external circulation advertising is closely related to the off-site environment (macro, advertisers' intention to spend, etc.), increasing ad load and eCPM or becoming a long-term revenue growth strategy. Internal circulation advertising accounts for nearly half of revenue, and is closely linked to e-commerce GMV. It may continue to deepen collaboration with e-commerce in the future and enhance supply-side richness through creator ecology and brand expansion. [Looking at e-commerce again], we think the three key words for operating ideas are public domain traffic, pan-shelf, and small to medium brands. ① Kuaishou's traffic gene is strong in the private domain, and the global construction of content+shelf establishes a dual traffic circulation model combining self-broadcasting and distribution to solve the brand's public domain traffic bottleneck. ② The share of GMV on the pan-shelf has increased, merchants get global exposure, and consumers enjoy more category choices to promote long-term conversion (users grown by high-quality content are expected to be converted into orders after being reached twice by shopping malls, recommendation pages, etc.). ③ The traffic gene lays the foundation for Kuaishou's “trusted e-commerce”, seizing the market of small, medium, and industrial merchants to form differentiated competition with Douyin.
Investment advice: The core business is growing rapidly, entering the fast track of steady quarterly profit release. We forecast that the company's revenue for 24-26 will be 1278/1432/153.8 billion yuan, respectively, up 12%/7% year on year; adjusted net profit to mother will be 161/214/255 billion yuan, respectively, up 57%/33%/19% year on year. The analysis was carried out using the SOTP valuation method. For 24-26, the adjusted net profit was 12/9/8 times PE, the target market value for 24 years was HK$273.3 billion, and the corresponding target price was 62.92 HKD. For the first time, coverage was given a “recommended” rating.
Risk warning: Risk of stricter regulation of live e-commerce, risk of anchor inappropriate remarks affecting platform image, channel competition disrupting traffic structure, etc.