Kuaishou's 24-year advertising may exceed expectations and advance AIGC's implementation in the advertising and digital human scene. We believe that Kuaishou and AIGC in the advertising industry will accelerate implementation in '24, especially video and material generation. If improved ROI brings room for price increases in the later stages, it is expected to improve advertising revenue and gross margin beyond expectations. Looking back at the Kuaishou Magnetic Conference on March 26, Kuaishou promoted the development of the Wensheng Video Big Model at the end of last year. In the future, it will combine the AIGC model with producer tools to help creators lower the creative threshold and improve the quality and efficiency of short video production. For example, LLM in the marketing field will generate Kuaishou-style video materials, and Nina Digital will help reduce costs and increase the efficiency of live streaming rooms. We maintain the company's adjusted net profit forecast of $184/227.26/26.7 billion for 24-26, and maintain a target price of HK$85.06 and a purchase rating based on the SOTP valuation.
Kuaishou promoted the big model in 24 years, improving efficiency in various application scenarios Kuaishou said at the Magnetic Conference on March 26 that the 24-year AI plan will focus on promoting AIGC implementation applications of large models, such as the Kuaishou Italian language model, the big model (Wenshengtu multi-modality), the big Pangu model (video material generation), and the live streaming of female digital people. We also participated in the live beta testing of the Kuaishou model, believing that Kuaishou is at the leading level in the domestic field of short video marketing, automobile and home improvement verticals; the company also stated that the marketing language model can understand 91% of short video content. The company expects that within half a year, the overall performance of Kuaishou LLM and Wenshengtu's big model will be close to the level of GPT-4.0 and Midjourney V5.
The “Pangu” model generates video material, and the “female” digital person helps reduce the cost of the live broadcast room. ① The Pangu model can generate advertisements or videos with one click to form content in the Kuaishou style; in the first quarter, the relevant AIGC video penetration rate reached 24%, increasing the advertising conversion rate by 33%, and leading to a significant year-on-year decrease in customer acquisition costs. ② In some scenarios, the conversion rate of Nu Ewa's digital live streaming is close to the level of real people, and future live streaming products are selected by trial and error at the lowest cost. ③ In terms of smart marketing, Kuaishou launched sitewide promotion last year, reaching a peak consumption of 15 million in 23 years. Judging from the results, the sitewide promotion penetration rate of circular advertising reached 20% in the first quarter, and the customer penetration rate of intelligent hosting exceeded 40%, increasing lead management by 86%. Kuaishou said that the customer penetration rate in the non-closed loop industry was close to 30%, which also boosted the double chat rate by nearly four times after the launch of smart customer service.
Risk warning: The growth rate of ad loading rate is lower than expected, the growth rate of live e-commerce is lower than expected, and the expansion of shelf e-commerce falls short of expectations