Incident: Kuaishou achieved revenue of 30.975 billion yuan, +11.6% year over year, achieved net profit of 3.98 billion yuan, +168.7% year over year, and achieved adjusted net profit of 4.679 billion yuan, +73.7% year over year. Profit performance exceeded expectations.
Comment: The gross margin reached another record high, and the cost side continued to improve. 2024Q2's gross margin reached 55.3%, +5.1 pcts year on year, another record high. In addition, the sales cost rate/management cost ratio reached 32.4%/2.6%/9.1%, and the total cost ratio decreased by 1.9 pcts year on year compared to 2023Q2. The moderate increase in sales expenses was mainly due to increased promotion investment in e-commerce and other businesses. The optimization of management and R&D expenses was mainly due to a reduction in employee welfare expenses, including share-based compensation expenses.
Advertising efficiency continues to be optimized, and the e-commerce MAC penetration rate is at a new high. 2024Q2's advertising revenue was 17.5 billion yuan, +22.1% over the same period. Advertising efficiency continued to improve. Among them, the increase in external circulation advertising increased further compared to Q1, the average daily consumption of paid skits increased by more than 2 times year-on-year, internal circulation advertising achieved steady growth, and the total consumption of sitewide promotion or smart hosting reached 40% of the total internal circulation consumption. In e-commerce, the company's 2024Q2 e-commerce GMV was 305.253 billion yuan, +15% year over year, driving the company's other revenue up 21.3% year over year to 4.158 billion yuan. The company's MAC reached 0.131 billion yuan, +14% year over year, and the penetration rate reached a new high of 18.9%. In addition, 2024Q2 pan-shelf e-commerce also achieved outstanding performance, accounting for more than 25%, and order volume increased 65% year over year during the 618 period.
Grasp the development trend of technology and improve business efficiency through AI. The company currently has an industry-leading AI matrix, including fast Italian language models, large visual generation models, and recommended large models. 2024Q2 began comprehensive testing of Keling AI, a large-scale video generation model, and relied on Keling to launch the first domestic AIGC original fantasy short drama Shanhai Wonderland, which had over 50 million broadcasts in 2 weeks. In addition, Wenshengtu's AI generation model Ketu has also been officially open sourced. With 2024H1, nearly 0.02 million merchants used AI matrices to optimize operations on the Kuaishou platform. The daily peak consumption of AIGC marketing materials from 2024Q2 marketing customers reached 20 million yuan.
Investment advice: The company is expected to achieve operating income of 126.609/140.834/155.558 billion yuan in 2024-2026, up 12%/11%/10% year on year, and achieve adjusted net profit of 17.808/24.056/31.061 billion yuan, up 73%/35%/29% year on year. The corresponding PE is 13x/9x/7x, maintaining the “buy” rating.
Risk warning: risk of user growth falling short of expectations, risk of increased competition, risk of industry regulatory policies