On May 22, the short video leader Kuaishou-W (01024) presented an over-performing Q1 2024 performance report, with impressive performance in terms of revenue size, core business growth, cost reduction and efficiency improvement. In terms of product structure, operating income of 100-300 billion yuan ranged from 401/12.88/0.06 billion yuan respectively.
As observed by the Wise News Finance APP, on the second day (May 23) after Kuaishou's financial report was released, the Hong Kong stock market's major indices showed a volatile decline, with the Hang Seng Tech Index falling by 2.41%. However, Kuaishou rose by up to 4.56% during trading, becoming a bright spot in the market, and fully reflecting the capital market's expectation of the Q1 financial report.
The inflow of funds more directly reflects the market's bullish outlook for the company's future -- even on a flat market on May 23, Kuaishou's daily trading volume reached 80.92 million shares, with a turnover of HKD 4.799 billion. It ranked among the top performers in active trading on the Hong Kong stock market, with a net purchase of HKD 471 million in the Shanghai-Hong Kong Stock Connect (southbound), firmly in the lead.
In fact, as early as early February, funds in the market had been paying attention to Kuaishou, continuously pushing up its stock price. From February 5 to May 3, Kuaishou's highest increase was 65%. As of the end of May 31, Kuaishou had received a net inflow of HKD 3.699 billion in nearly 60 trading days. It is now clearly back on an upward trajectory, demonstrating bullishness in the capital market.
AI technology empowerment, Q1 performance far exceeds expectations
For the market, Q1 performance is undoubtedly the core driving factor for Kuaishou's individual stock performance, and its high-quality fundamentals have become a strong support for the stock price.
The financial report shows that Kuaishou achieved a total revenue growth of 16.6% YoY to RMB 29.408 billion in the first quarter, exceeding the consensus estimate of RMB 29 billion by Bloomberg. Gross profit was RMB 16.12 billion, up 37.6% YoY, while profits in the period were RMB 4.12 billion, reversing losses from the previous year. Adjusted net profit was RMB 4.388 billion, an increase of 10,347.6% YoY, and far exceeding the consensus estimate of RMB 3.198 billion by Bloomberg.
Among them, online marketing services revenue reached RMB 16.7 billion, up 27.4% YoY, mainly due to the company's dedication to promoting the application of intelligent marketing solutions and upgrading the capabilities of the entire site's promotional products, which has spurred an increase in the number of marketing clients and marketing customer ad consumption. Other service revenues were RMB 4.2 billion, up 47.6% YoY, mainly due to the growth of the company's e-commerce business, manifested by an increase in the total transaction amount of e-commerce goods, with e-commerce business GMV up 28.2% YoY to RMB 288.1 billion. The increase in the total transaction amount of e-commerce goods is due to the company's continued fine-tuned operating strategy and expansion of the e-commerce domain, which has spurred an increase in the number of active paying users and the number of active sellers of goods.
In Q1 2024, Kuaishou's average daily active users and average monthly active users reached 394 million and 697 million respectively, up 5.2% and 6.6% YoY. Each daily active user of Kuaishou's app had an average usage time of 129.5 minutes. The company's user traffic is steadily increasing, with total usage time in Q1 2024 up 8.6% YoY.
The Wise News Finance APP has noticed that Kuaishou is steadily promoting the development and training of its own large-scale language model to empower multiple business scenarios with AI technology to increase efficiency and promote growth. With the assistance of AI and the capacity for large language models, the company's intelligent marketing solutions are equipped to provide customers with full-link, effective solutions including intelligent creation, intelligent placement, and intelligent user connection.
In terms of intelligent creation, the company's AIGC capability can quickly generate better creative content. In Q1 2024, the peak daily consumption of AIGC marketing materials exceeded RMB 10 million. For intelligent placement, the company's Universal AutoX (UAX) product and entire site promotion product are equipped to provide customers with automated placement capabilities including bidding, real-time monitoring, and regulation. In terms of intelligent user connection, the company's AI intelligent customer service can help clients to communicate with target customers, significantly improving marketing conversion efficiency.
Recently, Kuaishou's self-developed large-scale language model product "Kolors" has been officially launched, with more than 20 AI image games available for free on the official website and WeChat mini program, including Red Diamond Aristocracy, My Childhood, and other AI image customization games, as well as AI creation games. Unlike other products in the same category that require multiple photos and a longer time to complete AI generation, Kolors only requires one image and a few seconds to generate a high-quality set of AI images. Looking ahead, we can imagine that Kolors and Kuaishou's business will be deeply integrated, generating positive impacts on content ecology enrichment, e-commerce enablement, and expansion into new businesses, and providing new growth momentum for Kuaishou's performance.
Wise News Finance APP noted that Kuaishou's stock price rose rapidly on June 3, up 2.16% at its highest intraday, achieving a "good start" in June, influenced by positive news in recent days.
Many brokerages are bullish on Kuaishou's growth prospects.
What is noteworthy is that after the Q1 operating data was released, Kuaishou's favorable growth prospects and long-term profit delivery received positive updates from domestic and foreign brokerages, which issued updated research reports after earnings. This fully demonstrates the various brokerage analysts' recognition of the company's value.
Morgan Stanley released a research report stating that their outlook for the stock price of Kuaishou over the next 1 to 2 years is more optimistic, and they are bullish on the profitability brought by the development of its fundamentals. The report maintains a "shareholding" rating, raising its forecast for adjusted net income in 2024 by 6% to 17 billion yuan, and stating that it has demonstrated strong cost control capabilities, with gross margins continuing to improve. The marketing costs of daily active users have steadily declined over the past three years, and profits are expected to further increase, with a target price of HKD 95.
Morgan Stanley stated that Kuaishou's advertising revenue in the first quarter of this year increased by 27% year-on-year, mainly due to healthy growth in internal and external advertising, further increases in advertising loads, and the drive from the “Fun” AI model. It is expected that the annual advertising revenue will increase by 25% year-on-year. In terms of e-commerce business, it is expected that the SKU (inventory unit) and monthly active customer penetration rate will increase, driving a 25% year-on-year growth in GMV (total transaction value of goods) and a 30% increase in e-commerce revenue for the year.
Bank of America Securities reiterated a "buy" rating for Kuaishou, stating that the profit trend is stable and announced a new share buyback plan. It maintains the forecast for a 25% year-on-year increase in commodity transaction volume for the second quarter and the whole year, while raising the forecast for adjusted net income in 2024 and 2025 by 7% and 2%, respectively. The target price was raised from HKD 75 to HKD 78.
Bank of America stated that Kuaishou has once again delivered a satisfactory performance, with business growth on track and strong profit growth, promising prospects. The bank believes that the growth prospects of Kuaishou's business are still optimistic, mainly due to the good momentum of the 618 promotion and the expansion of e-commerce shopping scenarios. The company stated that while the advertising load is stable in the first quarter, advertising prices are also improving. By transferring to a combination of high-profit e-commerce and advertising businesses to improve efficiency and control operating costs, it will continue to drive profit growth.
China International Capital Corporation stated in a research report that Kuaishou's community ecology in the first quarter was stable and the growth rate of core e-commerce and advertising businesses was impressive. Gross margin continued to improve, and the profit entered a steady release range. Taking into account the continuous release of operating leverage, China International Capital Corporation raised the estimate of Kuaishou's Non-IFRS net income for 2024 by 8% to 18.5 billion yuan, maintaining the profit forecast for 2025, and the current stock price corresponds to 13/11 times the 2024/2025 Non-IFRS P/E. The rating is maintained at "outperform the industry", and the target price is raised by 7% to HKD 75, corresponding to 16/15 times the 2024/2025 Non-IFRS P/E.
From a comprehensive perspective of various institutions, the market is generally optimistic about Kuaishou's strong Q1 2024 performance, cost reduction and efficiency increase, and commercial expansion. It is expected that all of the company's businesses will continue to experience good growth, and that the profit margin will continue to be optimized in the future. In the medium and long term, Kuaishou's platform ecology for monetizing e-commerce, advertising, live broadcasting, and other channels is expected to continue to improve. Thus, we can see that Kuaishou is currently in a stage of resonance between growth and value, with the long-term appeal expected to accelerate.
Zhijun Finance App noticed that based on its confidence in its own business outlook and prospects, Kuaishou announced the launch of a new round of share buybacks on May 22. The announcement shows that Kuaishou plans to repurchase stocks with a total amount of no more than HKD 16 billion in the next three years after the end of the 2024 shareholders meeting. The Bank of America's analysis believes that this will bring about an annualized return of approximately 2% for Kuaishou stock investors.