The 2023Q4 cost ratio continues to be optimized, and profits have exceeded expectations. Kuaishou achieved revenue of 32.6 billion yuan in 2023Q4, yoy +15%. Among them, advertising/ livestreaming/ e-commerce and other revenue was 182/100/4.3 billion yuan, yoy +21%/+0%/+36%. The company's Q4 gross profit margin was 53.1%, yoy+7.6pct. The company's Q4 sales, management and R&D expense rates were 31.3%/2.3%/10.1%, yoy-3.1/-1.3/-2.1pct, respectively. The company's Q4 adjusted net profit of 4.36 billion yuan, an adjusted net profit margin of 13.4%, yoy+13.6pct, exceeding market expectations. Q4 Kuaishou DAU and MAU were 3.825/704 million, yoy +4.5%/9.4%. Q4 The average daily usage time for daily active users is 124.5 minutes.
Revenue for the full year of 2023 was 113.5 billion yuan, yoy +20.5%. Adjusted net profit of $10.27 billion, turning a year-on-year loss into a profit.
E-commerce: The number of buyers continues to grow, and the broad shelf and short video space are impressive. Driven by the Double 11 promotion, Q4 e-commerce GMV reached 403.9 billion yuan, yoy +29%. GMV for the full year of 2023 was 1.18 trillion yuan, up 31% year over year.
On the user side, the average number of 2023Q4 monthly buyers reached 130 million, and the penetration rate rose to 18.6%. On the supply side, the average sales volume in Q4 increased by more than 50% year-on-year. Kuaishou has accelerated the promotion of pan-shelf e-commerce layout, fully opening the homepage store tab. The overall GMV growth rate of Q4 Pan-Shelf is very large, accounting for more than 20%, the GMV growth rate of the mall is over 50%, and the year-on-year growth rate of search GMV is over 60%. In the short video sector, short video e-commerce GMV grew at a year-on-year rate of over 100%.
As Kuaishou e-commerce has a rich supply side and the layout of multiple marketplaces such as shelf e-commerce, promoting the penetration of e-commerce users and increasing the frequency of purchases, we expect e-commerce GMV to continue to maintain a high growth rate in 2024Q1.
Advertisement: Internal circulation is strong, and external circulation accelerates recovery. Q4 Kuaishou advertising revenue was +21%, accounting for 56% of total revenue, and the number of active marketing customers in Q4 increased by more than 160% year over year. Q4 Kuaishou single DAU advertising yoy +15.5% to 47.6 yuan. Among them, in terms of internal circulation, Kuaishou continues to upgrade intelligent marketing launch products such as full-site promotion and smart marketing, and the number of Q4 merchants sold increased by 50% compared to Q1. In terms of external circulation, the Q4 growth rate increased month-on-month compared to Q3, and industries such as media information, education, training, and gaming performed well.
Looking ahead to 2024Q1, we expect that internal circulation advertising will grow rapidly with e-commerce, and external circulation will continue to recover.
Live streaming is under pressure for a short period of time, and innovative businesses are advancing rapidly. Due to continued promotion of content ecosystem governance, 2023Q4 live streaming revenue remained flat year on year, and we expect subsequent live streaming growth to remain under pressure in the short term. In terms of new business, the average number of Q4 Kuaishou Local Life Daily Payment users increased by more than 40% month-on-month. The average number of daily resume posts in the Quick Hire business increased by more than 200% year over year, and the average number of daily users posted increased 100% year over year. Ideal Home Business's cumulative real estate transaction volume in Q4 exceeded 16 billion dollars.
AI: Iterative updates, application acceleration. According to the Kuaishou Performance Conference, 1) In terms of large language models, Kuaishou Q4 focuses on developing and training 175 billion large models, and is confident that the overall performance of the large model will reach the level of GPT 4.0 within the next six months. 2) In terms of multi-modality, the comprehensive performance of Wenshengtu's big model has surpassed Midjourney V5's “measurable” performance. 3) Wensheng video technology research and development began at the end of last year. Big model applications include: 1) Digital human live streaming. 2) Intelligent customer service. 3) Deep integration with Kuaishou app scenarios, such as AI gameplay reviews, AI Xiaokuai, AI search conversations, etc.
Investment advice: Maintain a “buy” rating. The estimated revenue for 2024-2026 is 1255/1438/159.6 billion yuan, up 11%/15%/11%, and adjusted net profit of 162/223/29.2 billion yuan, up 57%/38%/31%. Kuaishou was given a target price of HK$80, corresponding to 15 x 2025e P/E, maintaining a “buy” rating.
Risk warning: The number of Kuaishou users has fallen short of expectations, demand for advertising has declined, changes in the macro environment have exceeded expectations, and the impact of industry policies on business has exceeded expectations.