We expect Kuaishou to report 2Q24 results at end August. We model 9% YoY total revenue in 2Q24 with 22% YoY online ad, 21% YoY eC GMV and -14% YoY streaming. GPM/ adj. NPM meets consensus at 54.8%/ 14.4%. We deem core domestic online ad and eCommerce are experiencing intensified competitions brought by dominant industry peers amid macro headwinds, along with impacted N-T streaming by industry-wise adjustments. We expect AI empowerments and monetisations on new initiatives will provide additional fuel but it largely depends on Co.'s strategies and executions. Maintain BUY but cut our TP to HK$60.0 on 13.0x 2024 adj. EPS, implying 0.4x 2024E PEG.
Key Factors for Rating
Intensified competitions on core segments; Eye on AI empowerments and new initiatives' monetisations. We expect Co. to continue gaining shares in domestic online ad and eCommerce markets in 2024 despite intensified competitions amid saturated eC online penetrations, macro conditions and peers' executions. Streaming continues to be negatively impacted by industry-wise adjustments in 2024 and is expected to stabilise from 2025E onwards. We see monetisations of new initiatives such as local services, 'Live streaming +' from various verticals and games could fuel Co.'s growth but will be largely subject to Co.'s commitments, strategies and executions. Therefore, we nudge down our 2024-2026E total revenue forecasts by 1% with largely unchanged online ad and streaming estimations while 2-3% cut on eC GMV. We currently do not assume material revenue contributions from new initiatives in 2024-2026E. We largely maintain our 2024-2026E GPM and bottom line estimations unchanged.
2Q24 preview: Largely inline quarter. We expect user metrics to remain
healthy with DAUs logging 4% YoY to 391m and DTSPU exceeding 120mins. We model total revenue to deliver 9% YoY to RMB30.2bn, -1% below consensus. We forecast solid online ad revenue at 22% YoY despite intensified competition of eCommerce due to price war initiated by traditional eC platforms amid macro headwinds. We estimate eC GMV to grow 21% YoY, -3% miss consensus. GPM/ adj. NPM of 54.8%/ 14.4%, both meet streets' expectation.
Key Risks for Rating
Downside risks: 1) regulations; 2) intensified competition; 3) slower-than- expected macro recovery; 4) ineffective strategy executions; 5) content supply and source; 6) ineffective overseas monetization; 7) main shareholders' share distribution.
Valuation
Maintain BUY but cut our TP to HK$60.0 on 13.0x (vs. 15.0x previously derived from updated global peers comp) FY2024E Non-IFRS EPS of HK$4.62 (previously HK$4.64), implying 1.9x 2024E PS and 0.4x 2024E PEG.