The adjusted net profit and profit during the year both turned a loss into a profit in 2023, and the company's development entered an era of full profit. In 2023, the company's revenue was 113.47 billion yuan (+20.5% year over year), mainly due to growth in marketing services, e-commerce business and live streaming business; gross profit margin of 50.6% (+5.9pct year on year); sales expenses, administrative expenses and R&D expenses decreased by 1.7%, 10.4% and 10.5% year on year, respectively; profit turned loss into profit during the year, with a profit of 6.399 billion yuan; adjusted profit of 10.271 billion yuan, exceeding 10 billion yuan. By region, in 2023, the company's domestic revenue was 11.119 billion yuan (+18.8% YoY), operating profit was 11.402 billion yuan (year-on-year loss); overseas revenue was 2,284 billion yuan (YoY +265.4%), and operating loss was 2,789 million yuan, of which the 23Q4 overseas operating loss was 551 million yuan in a single quarter, achieving a significant loss reduction.
The growth of internal circulation advertising is the core, and external circulation advertising has continued to grow in industries such as skits, education, training, and games. In 2023, the company's online marketing service revenue was 60.304 billion yuan (+23% year over year), of which 23Q4 online marketing service revenue was 18.203 billion yuan in a single quarter (+20.6% year over year, +23.9% month over month), mainly due to refined industry operation strategies and continuous improvement of product capabilities, driving an increase in the number of marketing customers and marketing customer investment consumption, especially from the company's e-commerce merchants.
Deeply cultivate the live entertainment ecosystem and develop healthily for a long time. In 2023, the company's live streaming business revenue was 39.54 billion yuan (+10.4% year over year), thanks to the continuous enrichment of content supply and continuous iteration of live streaming ecosystems and algorithms. Among them, the 23Q4 live streaming business revenue for a single season was 10.048 billion yuan (flat year on year, +3.4% month over month). In 23Q4, the average daily active users and average monthly active users of the company's Kuaishou app reached 382.5 million and 700.4 million respectively, up 4.5% and 9.4%, respectively. The average daily usage time of Kuaishou users was 124.5 minutes.
The number of active e-commerce paying users and retail merchants has increased, and the business continues to grow at a high rate. In 2023, the company's revenue from other services was $14.112 billion (+44.7% YoY), mainly due to the growth of e-commerce business. In 2023, the company's overall e-commerce transaction scale increased by 31.4% year on year to 1184.4 billion yuan, of which the 23Q4 e-commerce transaction volume increased 29.3% year on year to 403.9 billion yuan. The average number of monthly e-commerce paying users reached a new high, breaking 130 million, and the monthly active user penetration rate increased to 18.6%.
Profit forecasting and valuation. We estimate: On the user side, we assume that the company will have 399 million DAU users in 2024-2026, 407 million, and 415 million users; MAU will be 713 million, 727 million, and 741 million respectively, and the number of users will continue to maintain effective penetration. Revenue: 1) Online marketing services: The company's average monthly DAU marketing service revenue in 2023 was 13.23 yuan (+15.1% year over year). We expect the company's average monthly DAU marketing service revenue for 2024-2026 to be 15.21 yuan, 17.04 yuan and 18.74 yuan respectively, with year-on-year growth rates of 15%, 12% and 10% respectively; online marketing service revenue is expected to be 72,856 billion yuan, 83.231 billion yuan, and 93.385 billion yuan respectively, with year-on-year growth rates of 20.8%, respectively. 14.2% and 12.2%. 2) Live streaming business: We estimate that the number of monthly paid live streaming users of the company in each quarter of 2023 was 60.1 million, 51 million, 51 million and 50.5 million, respectively, +6.4%, -5.9%, -14.4%, and -12.4% year-on-year; then the average number of monthly live streaming paying users in 2023 was 53.2 million (-7% YoY), with monthly live streaming revenue of 61.2 yuan (+18.7% YoY). We expect the company's average monthly live streaming subscription users in 2024-2026 to be 50.4 million, 49.4 million, and 48.9 million, respectively, down 5%, 2%, and 1% year-on-year; monthly live streaming payment revenue was 59.3 yuan, 58.7 yuan, and 58.7 yuan, respectively, down 3%, 1%, and 0% year on year; live streaming business revenue was 35.844 billion yuan, 34.776 billion yuan, and 34.28 billion yuan, respectively. 3) E-commerce business: We expect the company's e-commerce transaction scale to be 14805 billion yuan, 1702.5 billion yuan and 1872.8 billion yuan respectively, with year-on-year growth rates of 25%, 15% and 10% respectively; e-commerce sales takerate will be 1.18%, 1.19%, and 1.19% respectively; assuming that e-commerce business accounts for 96.8%, 96%, and 95% of other business revenue, respectively, the company's other business revenue in 2024-2026 will be 18.108 billion yuan, 21.175 billion yuan, It was 23.538 billion yuan, up 28.3%, 16.9%, and 11.2%, respectively.
Overall, we expect the company's revenue for 2024-2026 to be 126.809 billion yuan, 139.183 billion yuan, and 151,352 billion yuan respectively, with year-on-year growth rates of 11.8%, 9.8% and 8.7% respectively; net profit to mother of 14.257 billion yuan, 19.786 billion yuan and 23.977 billion yuan respectively, with year-on-year growth rates of 122.9%, 38.8% and 21.2% respectively. Using the PE valuation method, refer to the 2024 average PE valuation of comparable companies. Considering the company's own business and profit development stage, the company was given a PE valuation of 16-20 times in 2024, calculated at RMB 1 = HK$1.1026, corresponding to a reasonable value range of HK$57.90-72.37 per share. Using the P/S segmented valuation method, referring to the 2024 average PS valuation of e-commerce business, marketing business, and live streaming business of comparable companies, we gave the company a 2024 PS valuation of 2-2.5 times, marketing business 1.5-2 times PS valuation, and live streaming business 1 times PS valuation, calculated based on RMB 1 = HK$1.1026, corresponding to a reasonable value range of HK$46.03-57.57 per share. Based on the principle of prudence, we combined the PE and PS valuation methods and used the lower average and upper mean values of the two, respectively. We believe that the reasonable value range for the company is 51.96 yuan/share - HK$64.97 per share, giving it an “superior to the market” rating.
Risk warning: Live streaming business policy supervision risks, e-commerce business development falls short of expectations.