Recently, Tencent's WeChat live e-commerce has undergone several major changes: including large-scale adjustments to the organizational structure, the addition of a small store sharer function, and the addition of a new e-commerce marketing tool “Global Connect” to strengthen brand investment. We think the comprehensive WeChat GMV ceiling for potential live streaming e-commerce is 3.6 percent.
Private domain: The maximum limit is expected to total 1.3 billion, which mainly covers 1) GMV inventory conversion for applet merchants (potential upper limit of 800 billion billion); 2) incremental GMV (potential upper limit of 480 billion yuan) brought about by small store sharers.
We believe that recent changes in the organizational structure of video e-commerce mean that the GMV inventory conversion of applets has accelerated; and we think the social fission brought about by the new gameplay of small store sharers is very suitable for WeChat.
Public domain: The maximum limit is expected to total 2.4 revenue, which mainly includes 0.28 trillion+2.07 revenue from video channel promotion. Video number 1) Video number DAU: User growth is content-driven and closely related to the creator base. Judging from the distribution of sources, endogenous creators of video accounts mainly come from conversions from creators on public accounts and in the circle of friends; foreign creators mainly come from content posted on all platforms of the Doukuai platform. According to our estimates, producer MAU could reach 0.186 billion, leveraging 0.68 billion user DAU. 2) Video number usage time: Universal user dilution time+serious content and a high percentage of non-core users will make the average video account user time lower than jitter speed. Different products will take different amounts of time, and the length of time users leveraged by entertainment content will be higher than that of knowledge and lifestyle. Because of the personalization of video accounts, traffic weight is skewed towards non-entertainment content.
Furthermore, considering that the “Little Red Dot” video channel will bring in a large number of users, the overall average usage time will be reduced to 80 minutes. 3) Live streaming load rate and unit price: The ad load rate may be lower than Douyin, and the unit price of the pen may be in between. According to Bruce Zhang's expectations, the video channel's future expectations will account for 77% of the public domain. We also expect the live video channel load rate ceiling to be slightly below 10% (or 8.4%) of Douyin's. The user city line of the video number is between Jikui. Only the steady-state transaction unit price of the video number link transaction or 125 yuan between the video number link transactions is taken into account.
Video e-commerce will enter a rapid growth channel in 2024, which will drive profit elasticity when marginal costs are low. IFRS net profit for 24-26 is estimated to be 170.8/196.9/226.5 billion yuan (previously 24-26 net profit was 165.7/188.4/218 billion yuan, increasing game and video revenue), and non-IFRS net profit to mother is 216.2/251.1/285.2 billion yuan. Based on the SOTP valuation, we gave a target price of HK$397.82 (RMB 363.51 HKD/RMB=0.91), maintaining a “buy” rating.
Risk warning
Creators' growth falls short of expectations, growth over time slows down, monetization rate falls short of expectations, and the impact of changes in assumptions